All the answers are shown. Can you explain with using excel with showing the for

ID: 2554983 • Letter: A

Question

All the answers are shown. Can you explain with using excel with showing the formulas? Thank you.

The wireless phone manufacturing division of a consumer electronics company uses activity-based costing, For simplicity assume that its accountants have identified only the following three activities and related cost drivers for indirect production costs: Three types of cell phones are produced Senior, Basic, and Deluxe Direct costs and cost-driver activity tor each product for ? recent month are as follows ?(Click the icon to view the costs and activity) Indirect production costs for the month were as follows ?(Click the icon to view the indirect production costs ) Read the requirements (Click the icon to view the activities and cost drivers) Data Table Requirement 1. Compute the indirect production costs allocated to each product with the ABC system Determine the formula, then compute the indirect cost rates for materials handling, engineering and power costs (Round the rates to two decimal places, xx) Basic Deluxe Indirect production costCost allocation base 31,500 50,000 25,000 350,000 100 500,000 Indirect cost allocation rate 009 per direct material dollar 500 per engineering change notice 0.05 per klowatt hour 80,000 S 50,000 S 220,000 5,325 s 2,130 80,000 200,000 220,000 58 Materials handling S Engineering Power Now detemine the indirect production costs allocated to each product, beginning with the Senior product, with the ABC system Indirect production costs Materials handling Engineering Power Total indirect costs allocated 10,295 S Kilowatt hours Engineering change notices 29 Senior Basic Deluxe Data Table More Info 7,200 S 6,500 4,000 4,500 S 14,500 10,000 29,000 S 19,800 29,000 11,000 Materials handling Cost Driver 31,500 50,000 25.000 06,500 17,700 $ Materials handling Engineering Direct-materials cost Engineering change notices Kilowatt hours Power This question is complete. Move your cursor over or tap on the red arrows to see incorrect answers. Total indiect oodiuction cost Requirement 2. Suppose all indirect production costs had been allocated to products in proportion to their direct-labor costs. Compute the indirect production costs allocated to each product Begin by determining the indi rect cost allocation rate assuming al indirect production costs are allocated to products in proportion to their direct-labor costs using the same tormula labels as you determined in requirement 1 Total indirect production S Now determine the total indirect production costs allocated to each product assuming all indirect production costs are allocated to products in proportion to their direct-labor costs. 106,500 17,750 6 per direct labor dollar Basic Deluxe 61,770 31950 12,780 Indirect production costs allocated Requirement 3. In which product costs, those in requirement 1 or those in requirement 2, do you have the most confidence? Why? The product costs from requirement 1, using an ABC system, is likely more accurate since it allocates indi rect production costs using multiple cost pools to account for the dilerent production activities his question is complete. Move your cursor over or tap on the red arrows to see incorrect answers.

Explanation / Answer

Solution:

Part 1 --- Indirect production cost allocation to each product with the ABC System

Activity Based Costing System

- ABC is a costing method which identifies the activities in the organization and assigns the cost of each activity with resources to all the products or services according to the actual consumption of activity by the product or service.

- This system determines all the activities related to product or production process.

- This system calculates the cost of those activities which are related to product or production process and thereafter determine the cost of the product.

- In ABC costing the overhead costs are distributed to the product on the basis of benefit received from indirect activity.

- It helps to distribution of overheads on the basis of activities.

The Activity based overhead rate = Estimated Overheads related to the activity / Total Cost Driver per activity)

First of all we need to calculate indirect cost rates for activity cost pools

Indirect Production Cost

Cost allocation base

Indirect Cost Allocation Rate

Materials Handling (Cost allocation base is direct material costs so we will total the direct material cost and put the figure in cost allocation base)

31500

350,000

(Direct material cost 80,000 + 50,000 + 220,000)

0.09

(31500 / 350,000)

Per direct material dollar

Engineering (Allocation base is engineering change notice)

50000

100

(Notices 13+29+58)

500

per engineering change notice

Power (Allocation base kilowatt hours)

25000

500,000

(Kilowatt 80,000 + 200000+220000)

0.05

per kilowatt hour

Now, we need to allocate the indirect production cost based on the actual activities performed by the each product.

Senior

Basic

Deluxe

Materials handling

$7,200

(80,000 DM*Rate 0.09)

$4,500

(50,000 DM*Rate 0.09)

$19,800

(220,000 DM*Rate 0.09)

Engineering

$6,500

(Notice 13*Rate500)

$14,500

(Notice 29*Rate500)

$29,000

(Notice 58*Rate500)

Power

$4,000

(kilowatt 80,000*Rate 0.05)

$10,000

(kilowatt 200,000*Rate 0.05)

$11,000

(kilowatt 220,000*Rate 0.05)

Total indirect cost allocated

$17,700

$29,000

$59,800

Requirement 2 ---

If all the indirect production cost is allocated based on direct labor costs

Total indirect production

$106,500

Total Direct labor cost $17,750

(10295 + 5325 + 2130)

$6 per direct labor dollar

(106500 / 17750)

Requirement 3 – already answered..

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you