Chapter 4: Activity-Based Costing\t\u00a0\tACC 560 WEEK 3 Chapter 4 Brief Exercises 7 and 12; Exercises 1, 6, and 14\tBE4-7\tSpud, Inc. a manufacturer of gourmet potato chips, employs activity-based costing. The budgeted data for each of the activity cost pools is provided below for the year 2017.\tActivity Cost Pools \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0 Estimated Overhead \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0 Expected Use of Cost Drivers per Activity\tOrdering and receiving \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0 $84,000 \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0 12,000 orders\tFood processing \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0 480,000 \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0 60,000 machine hours\tPackaging \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0 1,760,000 \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0 440,000 labor hours\t\u00a0\tFor 2017, the company had 11,000 orders and used 50,000 machine hours, and labor hours totaled 500,000. What is the total overhead applied?\t\u00a0\tBE4-12\tSpin Cycle Architecture uses three activity pools to apply overhead to its projects. Each activity has a cost driver used to allocate the overhead costs to the projects. The activities and related overhead costs are as follows: initial concept formation $40,000, design $300,000, and construction oversight $100,000. The cost drivers and expected use are as follows.\tActivities \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0 Cost Drivers \ufffd \ufffd \ufffd \ufffd \ufffd Expected Use of Cost Drivers per Activity\tInitial concept formation \ufffd\u00a0 Number of project changes \u00a0\u00a0\u00a0 “\ufffd”\ufffd”\ufffd \ufffd \ufffd \ufffd\u00a0\u00a0 20\tDesign \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd Square feet \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0 150,000\tConstruction oversight \ufffd \ufffd Number of months \u00a0\u00a0\u00a0\u00a0 “\ufffd”\ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0 100\t\u00a0\t(a) Compute the predetermined overhead rate for each activity.\t\u00a0\t(b) Classify each of these activities as unit-level, batch-level, product-level, or facility-level.\t\u00a0\tE4-1\t\u00a0Saddle Inc. has two types of handbags: standard and custom. The controller has decided to use a plant wide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations.\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd Standard \ufffd \ufffd \ufffd \ufffd Custom\tDirect labor costs \ufffd\u00a0 $50,000 \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0 $100,000\tMachine hours \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0 1,000 \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0 1,000\tSetup hours \ufffd \ufffd \ufffd 100 \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0 400\tTotal estimated overhead costs are $240,000. Overhead cost allocated to the machining activity cost pool is $140,000, and $100,000 is allocated to the machine setup activity cost pool.\tInstructions:\ta. Compute the overhead rate using the traditional (plant wide) approach.\tb. Compute the overhead rates using the activity-based costing approach.\tc. Determine the difference in allocation between the two approaches.\t\u00a0\tE4-6\t\u00a0Santana Corporation manufactures snowmobiles in its Blue Mountain, Wisconsin, plant. The following costs are budgeted for the first quarter’s operations.\tMachine setup, indirect materials \ufffd \ufffd \ufffd\u00a0\u00a0 4,000\tInspections \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0 16,000\tTests \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0 4,000\tInsurance, plant \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd 110,000\tEngineering design \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0 140,000\tDepreciation, machinery \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0 520,000\tMachine setup, indirect labor \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0 20,000\tProperty taxes \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0 29,000\tOil, heating \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0 19,000\tElectricity, plant lighting \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd 21,000\tEngineering prototypes \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0 60,000\tDepreciation, plant \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd 210,000\tElectricity, machinery \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd 36,000\tMachine maintenance wages \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0 19,000\t\u00a0\tInstructions\tClassify the above costs of Santana Corporation into activity cost pools using the following: engineering, machinery, machine setup, quality control, factory utilities, and maintenance. Next, identify a cost driver that may be used to assign each cost pool to each line of snowmobiles.\t\u00a0\tE4-14\t\u00a0Venus Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year.\tThe controller, Peggy Kingman, is concerned about the residential product line. She cannot understand why this line is not more profitable given that the installations of window coverings are less complex for residential customers. In addition, the residential client base resides in close proximity to the company office, so travel costs are not as expensive on a per client visit for residential customers. As a result, she has decided to take a closer look at the overhead costs assigned to the two product lines to determine whether a more accurate product costing model can be developed. Here are the three activity cost pools and related information she developed:\tActivity Cost Pools \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0 Estimated Overhead \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0 Cost Drivers\tScheduling and travel \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0 $85,000 \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0 Hours of travel\tSetup time \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0 “\ufffd90,000 \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0 Number of setups\tSupervision \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0 “\ufffd60,000 \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0 Direct labor cost\tExpected Use of Cost Drivers per Product\t \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0\u00a0 Commercial \ufffd \ufffd\u00a0\u00a0\u00a0 Residential\tScheduling and travel \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0 750 \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0 500\tSetup time \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0 350 \ufffd \ufffd \ufffd \ufffd \ufffd\u00a0\u00a0\u00a0 250\tInstructions\ta. Compute the activity-based overhead rates for each of the three cost pools, and determine the overhead cost assigned to each product line.\tb. Compute the operating income for each product line, using the activity-based overhead rates.\tc. What do you believe Peggy Kingman should do?<\/p>\n","protected":false},"excerpt":{"rendered":"
Chapter 4: Activity-Based Costing \u00a0 ACC 560 WEEK 3 Chapter 4 Brief Exercises 7 and 12; Exercises 1, 6, and 14 BE4-7 Spud, Inc. a manufacturer of gourmet potato chips, employs activity-based costing. The budgeted data for each of the Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-200371","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/200371","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=200371"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/200371\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=200371"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=200371"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=200371"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}