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SMG AC 222 Lecture Notes - Lecture 7: Customer Service, Office Supplies, Product Design

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School
Boston University
Department
Accounting
Course
SMG AC 222
Professor
Ann Marie Asadoorian

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Document Summary

Step 1: differentiate traditional costing system and abc costing system. Organization-sustaining costs: organization-sustaining activities are those actions taken to maintain the operations of a business. For example, a company must pay property taxes, utilities, and insurance, irrespective of what it does to produce goods for sale or provide services to customers. Organization-sustaining activities tend not to vary with the level of activity, and so are more likely to be classified as fixed costs. Idle capacity is the remaining amount of capacity left in a company after productive capacity and protective capacity have been eliminated from consideration. Step 1: five levels of abc costing activity. Unit-level: different by units produced (ex: glue of the table) Batch-level: different by amount of orders (ex: machine setup time) Product-level: different by product (ex: product design/ advertising fee) Customer-level: different by the number of customers (ex: repairing car service) Organizational-sustaining: do not relate to a single product or batch and do not need to allocate.

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Related Questions

Murri Corporation has an activity-based costing system withthree activity cost pools-Processing, Setting Up, and Other. Thecompany's overhead costs, which consist of factory utilities andindirect labor, are allocated to the cost pools in proportion tothe activity cost pools' consumption of resources. Costs in theProcessing cost pool are assigned to products based onmachine-hours (MHs) and costs in the Setting Up cost pool areassigned to products based on the number of batches. Costs in theOther cost pool are not assigned to products. Data concerning thetwo products and the company's costs and activity-based costingsystem appear below:

Factory utilities (total) $ 36,500
Indirect labor (total) $ 11,000
Distribution of Resources Consumption Across ActivityCost Pools
Processing Settingup Other
Factoryutilities 0.30 0.20 0.50
Indirect labor 0.50 0.30 0.20
MHs Batches
Product X7 3,600 1,500
Product L4 7,600 900
Total 11,200 2,400
Product X7 Product L4
Sales (total) $ 70,900 $ 100,100
Direct materials(total) $ 25,400 $ 37,500
Direct labor(total) $ 32,400 $ 44,000
Required:
a.

Assign overhead costs to activity cost pools usingactivity-based costing. (Omit the "$" sign in yourresponse.)

Activity Cost Pools
Processing Settingup Other Total
Factoryutilities $ $ $ $
Indirect labor
Total $ $ $ $
b.

Calculate activity rates for each activity cost pool usingactivity-based costing. (Round youranswers to 2 decimal places. Omitthe "$" sign in your response.)
ActivityRate
Processing $ per MH
Setting up $ per batch
c.

Determine the amount of overhead cost that would be assigned toeach product using activity-based costing. (Omit the "$"sign in your response.)
Product X7 Product L4
Processing $ $
Setting up
Total $ $
d.

Determine the product margins for each product usingactivity-based costing. (Omit the "$" sign in yourresponse.)
Product Margin
Product X7 $
Product L4 $

7.

Murri Corporation has an activity-based costing system withthree activity cost pools-Processing, Setting Up, and Other. Thecompany's overhead costs, which consist of factory utilities andindirect labor, are allocated to the cost pools in proportion tothe activity cost pools' consumption of resources. Costs in theProcessing cost pool are assigned to products based onmachine-hours (MHs) and costs in the Setting Up cost pool areassigned to products based on the number of batches. Costs in theOther cost pool are not assigned to products. Data concerning thetwo products and the company's costs and activity-based costingsystem appear below:

Factory utilities (total) $ 34,200
Indirect labor (total) $ 12,800
Distribution of Resources Consumption Across ActivityCost Pools
Processing Settingup Other
Factoryutilities 0.40 0.30 0.30
Indirect labor 0.20 0.10 0.70
MHs Batches
Product X7 3,700 1,300
Product L4 7,700 700
Total 11,400 2,000
Product X7 Product L4
Sales (total) $ 78,100 $ 101,700
Direct materials(total) $ 22,800 $ 38,700
Direct labor(total) $ 35,200 $ 41,300
Required:
a.

Assign overhead costs to activity cost pools usingactivity-based costing. (Omit the "$" sign in yourresponse.)

Activity Cost Pools
Processing Settingup Other Total
Factoryutilities $ $ $ $
Indirect labor
Total $ $ $ $
b.

Calculate activity rates for each activity cost pool usingactivity-based costing. (Round youranswers to 2 decimal places. Omitthe "$" sign in your response.)
ActivityRate
Processing $ per MH
Setting up $ per batch
c.

Determine the amount of overhead cost that would be assigned toeach product using activity-based costing. (Omit the "$"sign in your response.)
Product X7 Product L4
Processing $ $
Setting up
Total $ $
d.

Determine the product margins for each product usingactivity-based costing. (Omit the "$" sign in yourresponse.)
Product Margin
Product X7 $
Product L4 $

Please show work

Murri Corporation has an activity-based costing system withthree activity cost pools-Processing, Setting Up, and Other. Thecompany's overhead costs, which consist of factory utilities andindirect labor, are allocated to the cost pools in proportion tothe activity cost pools' consumption of resources. Costs in theProcessing cost pool are assigned to products based onmachine-hours (MHs) and costs in the Setting Up cost pool areassigned to products based on the number of batches. Costs in theOther cost pool are not assigned to products. Data concerning thetwo products and the company's costs and activity-based costingsystem appear below:

Factory utilities (total) $ 35,500
Indirect labor (total) $ 9,600
Distribution of Resources Consumption Across ActivityCost Pools
Processing Settingup Other
Factoryutilities 0.40 0.50 0.10
Indirect labor 0.40 0.20 0.40
MHs Batches
Product X7 3,100 1,200
Product L4 7,800 1,000
Total 10,900 2,200
Product X7 Product L4
Sales (total) $ 79,500 $ 98,800
Direct materials(total) $ 26,400 $ 33,500
Direct labor(total) $ 36,200 $ 40,100
Required:
a.

Assign overhead costs to activity cost pools usingactivity-based costing. (Omit the "$" sign in yourresponse.)

Activity Cost Pools
Processing Settingup Other Total
Factoryutilities $ $ $ $
Indirect labor
Total $ $ $ $
b.

Calculate activity rates for each activity cost pool usingactivity-based costing. (Round youranswers to 2 decimal places. Omitthe "$" sign in your response.)
ActivityRate
Processing $ per MH
Setting up $ per batch
c.

Determine the amount of overhead cost that would be assigned toeach product using activity-based costing. (Omit the "$"sign in your response.)
Product X7 Product L4
Processing $ $
Setting up
Total $ $
d.

Determine the product margins for each product usingactivity-based costing. (Omit the "$" sign in yourresponse.)
Product Margin
Product X7 $
Product L4 $