In 1990 Bridgeton Industries produced three products at its Automotive Component
ID: 2342297 • Letter: I
Question
In 1990 Bridgeton Industries produced three products at its Automotive Component & Fabrication (ACF) Plant: Fuel Tanks, Manifolds, and Doors. Use the information below to respond to the following:
A.Complete the 1990 pro-forma by-product income statement, given the existing cost system in the case.
B. For each product, calculate the budgeted sales price per unit, full-absorption cost per unit, contribution margin (revenues minus variable costs) per unit, and profit per-unit.
C. Assuming no other changes, evaluate the following statement about Bridgeton’s cost system: “We should switch to machine hours as our cost driver for factory overhead to reduce RUCAG.”
D.Calculate the percentage of each activity driver in the Activity Analysis Table that each cost object consumes. Using the results, determine the number of indirect cost pools you think is needed for a multiple-allocation-base system.
E. Calculate the reported unit cost for each product using a multiple-allocation-base cost approach. Identify all important components of your system (cost pools, cost objects, cost drivers, etc.) and explain the design choices (e.g., number of cost pools, cost drivers) that you make.
1990 Pro-Forma Income Statement, by Product
Bridgeton Industries Automotive Component & Fabrication Plant
Fuel Tanks
Manifolds
Doors
Revenues
$83,535
$93,120
$49,887
Direct labor
4,599
6,540
2,963
Direct materials
16,996
35,725
16,825
Factory overhead*
Cost of Goods Sold
Gross Margin
*Allocated based on budgeted direct labor dollars.
Other 1990 Information
Fuel Tanks
Manifolds
Doors
Units budgeted, produced, and sold
5,427
7,532
10,420
Machine hours per unit
0.60
0.62
0.20
Available machine hours: 15,000
Activity Analysis Data
Activity
Driver
Consumption by
Total Activity Cost
Fuel Tanks
Manifolds
Doors
Run machines
Machine hours
$21,153
Maintenance
Maintenance hours
163.1
231.9
105.1
10,000
Quality control
Number of rejects
45
25
5
5,670
Set up
Set up hours
32.6
46.4
21.0
2,710
Supply material
Receipts
72
98
130
3,040
Pack and ship
Shipments
55
75
100
1,565
Plant safety
% of revenues
7,130
Provide personnel
Direct labor dollars
9,435
Provide facilities
Square feet
20,000
10,000
50,000
18,680
Total Indirect Costs
$79,383
Fuel Tanks
Manifolds
Doors
Revenues
$83,535
$93,120
$49,887
Direct labor
4,599
6,540
2,963
Direct materials
16,996
35,725
16,825
Factory overhead*
Cost of Goods Sold
Gross Margin
Explanation / Answer
Overhead
79383
Total direct labour cost (4599+6540+2963)
14102
Predetermined overhead rate (overhead / total direct labour cost)
562.92%
Fuel tanks
Manifolds
Doors
Revenues
$83,535
$93,120
$49,887
Direct labor
4,599
6,540
2,963
Direct materials
16,996
35,725
16,825
Factory overhead (direct labor * 562.92%)
25889
36815
16679
Cost of goods sold
47,484
79,080
36,467
Gross margin
$36,051
$14,040
$13,420
Fuel tanks
Manifolds
Doors
Direct labor
4,599
6,540
2,963
Direct materials
16,996
35,725
16,825
Total variable cost
21,595
42,265
19,788
Unit produced
5,427
7,532
10,420
Variable cost per unit (total variable cost / unit produced)
3.9792
5.6114
1.8990
Revenues
$83,535
$93,120
$49,887
Revenues per unit (revenues / unit produced)
$15.3925
$12.3633
$4.7876
Cost of goods sold
47,484
79,080
36,467
Full-absorption cost per unit (cost of goods sold / unit produced)
8.7495
10.4992
3.4997
Contribution margin per unit (revenues per unit - variable cost per unit)
$11.4133
$6.7519
$2.8886
Gross margin
$36,051
$14,040
$13,420
Profit per unit (gross margin / unit produced)
$6.6430
$1.8641
$1.2879
Activity based costing
Fuel tanks
Manifolds
Doors
Total
Units budgeted, produced, and sold
5,427
7,532
10,420
Machine hours per unit
0.6
0.62
0.2
Machine hours
3256.2
4669.84
2084
10010.04
Fuel tanks
Manifolds
Doors
Total
Revenues
83535
93120
49887
226542
% of revenue (sales of product /226542)
36.874%
41.105%
22.021%
Activity
Driver
Consumption by
Total activity cost
Fuel tanks
Manifolds
Doors
Total activity
Cost driver rate (total activity cost / total activity)
Run machines
Machine hours
3256.2
4669.84
2084
10010.04
$21,153
$2.1132
Maintenance
Maintenance hours
163.1
231.9
105.1
500.1
10,000
$19.9960
Quality control
Number of rejects
45
25
5
75
5,670
$75.6000
Set up
Set up hours
32.6
46.4
21
100
2,710
$27.1000
Supply material
Receipts
72
98
130
300
3,040
$10.1333
Pack and ship
Shipments
55
75
100
230
1,565
$6.8043
Plant safety
% of revenues
36.874%
41.105%
22.021%
1
7,130
$7,130.0000
Provide personnel
Direct labor dollars
4,599
6,540
2,963
14102
9,435
$0.6691
Provide facilities
Square feet
20,000
10,000
50,000
80000
18,680
$0.2335
Total indirect costs
$79,383
Overhead allocation under activity based costing
Activity
Cost driver rate
Fuel tanks
Manifolds
Doors
Activity
Cost (cost driver rate * activity)
Activity
Cost (cost driver rate * activity)
Activity
Cost (cost driver rate * activity)
Run machines
$2.1132
3256.2
$6,880.93
4669.84
$9,868.20
2084
$4,403.86
Maintenance
$19.9960
163.1
$3,261.35
231.9
$4,637.07
105.1
$2,101.58
Quality control
$75.6000
45
$3,402.00
25
$1,890.00
5
$378.00
Set up
$27.1000
32.6
$883.46
46.4
$1,257.44
21
$569.10
Supply material
$10.1333
72
$729.60
98
$993.07
130
$1,317.33
Pack and ship
$6.8043
55
$374.24
75
$510.33
100
$680.43
Plant safety
$7,130.00
36.874%
$2,629.11
41.105%
$2,930.78
22.021%
$1,570.10
Provide personnel
$0.6691
4599
$3,076.98
6540
$4,375.61
2963
$1,982.41
Provide facilities
$0.2335
20000
$4,670.00
10000
$2,335.00
50000
$11,675.00
Allocated overhead
$25,907.67
$28,797.51
$24,677.82
Fuel tanks
Manifolds
Doors
Revenues
$83,535
$93,120
$49,887
Direct labor
4,599
6,540
2,963
Direct materials
16,996
35,725
16,825
Factory overhead (as per above)
25908
28798
24678
Cost of goods sold
47,503
71,063
44,466
Gross margin
$36,032
$22,057
$5,421
Unit produced
5427
7532
10420
Unit product cost (cost of goods sold / unit produced)
$8.7530
$9.4347
$4.2674
Overhead
79383
Total direct labour cost (4599+6540+2963)
14102
Predetermined overhead rate (overhead / total direct labour cost)
562.92%