Question :
83) For each of the following activities identify an appropriate : 1196242
83) For each of the following activities identify an appropriate activity-cost driver.
a.machine maintenance
b.machine setup
c.quality control
d.material ordering
e.production scheduling
f.warehouse expense
g.engineering design
83)
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84) Brass, Chrome, and White.
Production takes 25, 25, and 10 machine hours to manufacture 1000-unit batches of brass, chrome and white faucets, respectively.
The following additional data apply:
BRASSCHROME WHITE
Projected sales in units30,00050,00040,000
PER UNIT data:
Selling price$40$20$30
Direct materials$
8$
4$
8
Direct labor$15$
3$
9
Overhead cost based on direct labor hours
(traditional system) $12$
3$
9
Hours per 1000-unit batch:
Direct labor hours
40
10
30
Machine hours
25
25
10
Setup hours1.00.51.0
Inspection hours
30
20
20
Total overhead costs and activity levels for the year are estimated as follows:
ActivityOverhead costsActivity levels
Direct labor hours2,900 hours
Machine hours2,400 hours
Setups$465,50095 setup hours
Inspections$405,0002,700 inspection hours
$870,500
Required:
a.Using the traditional system, determine the operating profit per unit for each style of faucet.
b.Determine the activity-cost-driver rate for setup costs and inspection costs.
c.Using the ABC system, for each style of faucet
1.compute the estimated overhead costs per unit.
2.compute the estimated operating profit per unit.
d.Explain the differences between the profits obtained from the traditional system and the ABC system. Which system provides a better estimate of profitability? Why?
84)
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85) Come-On-In Manufacturing produces two types of entry doors:
Deluxe and Standard.
The assignment basis for support costs has been direct labor dollars. For 2007, Come-On-In compiled the following data for the two products:
DeluxeStandard
Sales units50,000400,000
Sales price per unit$650.00$475.00
Direct material and labor costs per unit$180.00$130.00
Manufacturing support costs per unit$
80.00$120.00
Last year, Come-On-In Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line.
The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information for 20X5:
ActivityCost DriverCostTotalDeluxeStandard
Setupsof setups$
500,000500400100
Machine-relatedof machine hours$44,000,000600,000300,000300,000
Packingof shipments$
5,000,000250,00050,000200,000
Required:
a.Using the current system, what is the estimated
1.total cost of manufacturing one unit for each type of door?
2.profit per unit for each type of door?
b.Using the current system, estimated manufacturing overhead costs per unit are less for the deluxe door ($80 per unit) than the standard door ($120 per unit). What is a likely explanation for this?
c.Review the machine-related costs above. What is a likely explanation for machine-related costs being so high? What might explain why total machining hours for the deluxe doors (300,000 hours) are the same as for the standard doors (300,000 hours)?
d.Using the activity-based costing data presented above,
1.compute the cost-driver rate for each overhead activity.
2.compute the revised manufacturing overhead cost per unit for each type of entry door.
3.compute the revised total cost to manufacture one unit of each type of entry door.
e.Is the deluxe door as profitable as the original data estimated? Why or why not?
85)
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