Student Name: _____________________________________ Activity-Based Costing Requi
ID: 2420075 • Letter: S
Question
Student Name: _____________________________________ Activity-Based Costing Requirements: FILL IN THE …. "Blanks" MOH costs: Rent, Utilities, Insurance…………………………………………………………………………… $ 600,000 Quality control person assigned to batch runs………………… 36,000 Machine maintenance cost……………………………………………….. 70,000 Indirect Materials………………………………………………………………………………. 44,000 Indirect Labor: Supervisors…………………………………………………………….. 30,000 $ 780,000 Other data: Couches Chairs Ottomans Totals Number of machine hours 430 225 45 700 Machine hrs Number of batch runs 260 180 60 500 Batch runs Number of designs 9 4 2 15 designs Sq ft of plant occupancy 40,000 18,000 2,000 60,000 Sq ft of Plant Number of units made 3,000 1,800 1,200 6,000 units Sq ft of leather (DM) used 72,000 25,000 3,000 100,000 sq ft of leather Requirement #1: Allocate MOH utilizing DL$ MOH ratio MOH allocation rate Calculate the Predetermined MOH allocation rate using DL$ as the cost driver…..use the cells to the right for your calculations. After determining the MOH allocation rate, allocate MOH to all three products below. Fill-in all blank cells. Costs: Couches Chairs Ottomans Totals Direct Materials $ 116,000 $ 48,000 $ 12,000 $ 176,000 Direct Labor 151,000 123,400 115,600 390,000 Allocate MOH in these cells Total Inventoriable Costs Total Cost per unit (rounded) Requirement #2: Allocate MOH with Activity Based Costing. ABC allocation information: MOH Cost category Activity Base Selected Activity Measure Rent, Utilities, Insurance Quality control person Machine maintenance cost Indirect Materials Indirect Labor: Supervisors Calculate Activity Base Cost Drivers: Fill-in the blanks. Cost category MOH ratio MOH allocation rate Rent, Utilities, Insurance Quality control person Machine maintenance cost Indirect Materials Indirect Labor: Supervisors Update cost data Couches Chairs Ottomans Totals Direct Materials $ 116,000 $ 48,000 $ 12,000 $ 176,000 Direct Labor 151,000 123,400 115,600 390,000 Rent, Utilities, Insurance Quality control person Machine maintenance cost Indirect Materials Indirect Labor: Supervisors Total Inventoriable Costs Total Cost per unit Requirement #3: Total Cost Comparison Summarize your Total Cost per unit from Requirement 1 & 2. Assuming the company is a price setter, calculate the price per unit for both applications in order to achieve a 40% gross margin ratio per product line. Couches Chairs Ottomans Total Cost per unit utilizing DL$ (Req1) Price per unit to achieve 40% gross margin Total Cost per unit with ABC Price per unit to achieve 40% gross margin Student Name: _____________________________________ Activity-Based Costing Requirements: FILL IN THE …. "Blanks" MOH costs: Rent, Utilities, Insurance…………………………………………………………………………… $ 600,000 Quality control person assigned to batch runs………………… 36,000 Machine maintenance cost……………………………………………….. 70,000 Indirect Materials………………………………………………………………………………. 44,000 Indirect Labor: Supervisors…………………………………………………………….. 30,000 $ 780,000 Other data: Couches Chairs Ottomans Totals Number of machine hours 430 225 45 700 Machine hrs Number of batch runs 260 180 60 500 Batch runs Number of designs 9 4 2 15 designs Sq ft of plant occupancy 40,000 18,000 2,000 60,000 Sq ft of Plant Number of units made 3,000 1,800 1,200 6,000 units Sq ft of leather (DM) used 72,000 25,000 3,000 100,000 sq ft of leather Requirement #1: Allocate MOH utilizing DL$ MOH ratio MOH allocation rate Calculate the Predetermined MOH allocation rate using DL$ as the cost driver…..use the cells to the right for your calculations. After determining the MOH allocation rate, allocate MOH to all three products below. Fill-in all blank cells. Costs: Couches Chairs Ottomans Totals Direct Materials $ 116,000 $ 48,000 $ 12,000 $ 176,000 Direct Labor 151,000 123,400 115,600 390,000 Allocate MOH in these cells Total Inventoriable Costs Total Cost per unit (rounded) Requirement #2: Allocate MOH with Activity Based Costing. ABC allocation information: MOH Cost category Activity Base Selected Activity Measure Rent, Utilities, Insurance Quality control person Machine maintenance cost Indirect Materials Indirect Labor: Supervisors Calculate Activity Base Cost Drivers: Fill-in the blanks. Cost category MOH ratio MOH allocation rate Rent, Utilities, Insurance Quality control person Machine maintenance cost Indirect Materials Indirect Labor: Supervisors Update cost data Couches Chairs Ottomans Totals Direct Materials $ 116,000 $ 48,000 $ 12,000 $ 176,000 Direct Labor 151,000 123,400 115,600 390,000 Rent, Utilities, Insurance Quality control person Machine maintenance cost Indirect Materials Indirect Labor: Supervisors Total Inventoriable Costs Total Cost per unit Requirement #3: Total Cost Comparison Summarize your Total Cost per unit from Requirement 1 & 2. Assuming the company is a price setter, calculate the price per unit for both applications in order to achieve a 40% gross margin ratio per product line. Couches Chairs Ottomans Total Cost per unit utilizing DL$ (Req1) Price per unit to achieve 40% gross margin Total Cost per unit with ABC Price per unit to achieve 40% gross marginExplanation / Answer
Requirement 1. Total MOH = $780000 Total Direct labour Cost = $390000 MOH Cost per Direct Labour $ = 780000 / $390000 = $2 per DL$ Costs Couches Chairs Ottomans Total Direct Materials 116,000 48,000 12,000 176,000 Direct Labour 151,000 123,400 115,600 390,000 MOH (1510:1234:1156) 302,000 246,800 231,200 780,000 Total Inventoriable Costs 569,000 418,200 358,800 1,346,000 Total Cost per Unit (rounded) 190 232 299 No. of Units Made 3,000 1,800 1,200 Requirement 2. Activity Total Cost of Activity Cost Driver Cost driver Quantity Allocation Rate Rent, Utilities, Insurance 600000 Sq Feet of plant occupancy 60000 10 per Sq Feet of plant occupancy Quality control person assigned to batch runs 36000 No of batch runs 500 72 per Batch Run Machine Maint Cost 70000 machine hours 700 100 per machine hours Indirect Materials 44000 sq feet of leather used 100000 0.44 per sq feet of leather used Indirect Labour Supervisors 30000 No of designs 15 2000 per design Total 780000 Calculation of Cost per Unit as per Activity Cost Couches Chairs Ottomans Total No of Units Made 3000 1800 1200 Direct Materials 116,000 48,000 12000 176,000 Direct Labour 151,000 123,400 115600 390,000 MOH Cost Allocated Rent, Utilities, Insurance 400,000 180,000 20,000 600000 Quality control person assigned to batch runs 18,720 12,960 4,320 36000 Machine Maint Cost 43,000 22,500 4,500 70000 Indirect Materials 31,680 11,000 1,320 44000 Indirect Labour Supervisors 18,000 8,000 4,000 30000 Total Costs 778,400 405,860 161,740 1,346,000 Cost Per unit 259 225 135 Requirement 3 Couches Chairs Ottomans Total Cost per Unit under DL$ 190 232 299 Activity Based Costing 259 225 135 Difference (Simple - Activity) (70) 7 164 Couches Chairs Ottomans Total Cost per Unit under DL$ 190 232 299 Price Per Unit to Achieve 40% Gross Margin 316 387 498 Total Cost per Unit under ABC Costing 259 225 135 Price Per Unit to Achieve 40% Gross Margin 432 376 225