Chapter 19: Q5RQ (page 1063)
Why is the use of departmental overhead allocation rates considered a refinement over the use of a single plantwide overhead allocation rate?
Departmental overhead allocation rates is not based on only one allocation base
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Why are some quality costs hard to measure?
Activity-based costing requires four steps. List the four steps in the order they are performed.
Refer to Exercise E19-20. For 2019, Eason’s managers have decided to use the same indirect manufacturing costs per wheel rim that they computed in 2018 using activitybasedn costing. In addition to the unit indirect manufacturing costs, the following data are expected for the company’s standard and deluxe models for 2019:
Standard Deluxe
Sales price \( 800.00 \) 940.00
Direct materials 31.00 48.00
Direct labor 45.00 52.00
Because of limited machine hour capacity, Eason can produce either2,000 standard rims or2,000 deluxe rims.
Requirements
3. Which course of action will yield more income for Eason?
Question:Oscar, Inc. manufactures bookcases and uses an activity-based costing system. Oscar’s activity areas and related data follow:
Activity | Budgeted Cost of Activity | Allocation Base | Predetermined Overhead Allocation Rate |
Materials handling | \( 240,000 | Number of parts | \)1.00 |
Assembly | 3,500,000 | Number of assembling direct labor hours | 17.00 |
Finishing | 190,000 | Number of finished units* | 4.50 |
*Refers to number of units receiving the finishing activity, not the number of units transferred to Finished Goods Inventory
Oscar produced two styles of bookcases in October: the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing. The totals for quantities, direct materials costs, and other data follow:
Product | Total Units Produced | Total Direct materials Costs | Total Direct Labor Costs | Total Number of Parts | Total Assembling Direct Labor Hours |
Standard bookcase | 7,000 | \(91,000 | \)105,000 | 28,000 | 10,500 |
Unfinished bookcase | 7,500 | 82,500 | 75,000 | 22,500 | 7,500 |
Requirements
1. Compute the manufacturing product cost per unit of each type of bookcase.
Question:Newton Company has analyzed its production process and identified two primary activities. These activities, their allocation bases, and their estimated costs are listed below.
Activity | Allocation Base | Estimated Activity | Estimated Costs |
Purchasing | Number of purchase orders | 200 purchase orders | \( 10,000 |
Materials Handling | Number of parts | 15,000 parts | \) 7,500 |
The company manufactures two products: Regular and Super. The products use the following resources in March:
Regular Super
Number of purchase orders 5 purchase orders 7 purchase orders
Number of parts 600 parts 750 parts
5. Compute the predetermined overhead allocation rates using activity-based costing.
6. Determine the amount of overhead allocated to Regular products in March.
7. Determine the amount of overhead allocated to Super products in March.
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