Adirondack Corporation is estimating activity costs associatedwith producing two different sized e-reader tablets. The indirectlabor can be traced to three separate activity pools. The budgetedactivity cost and activity base information, along with theestimated activity-base information, is provided below.
ActivityCost Activity Base
Purchasing $250,000 Number of purchase orders
Materials handling $500,000 Number of moves
Production 1,350,000 Machinehours
TOTAL $2,100,000
Number of Purchase Orders; Number of Moves; Machine Hours;Number of Units
7â tablet 3,000 1,500 2,500 2,500
10" tablet 5,000 600 7,500 3,500
TOTALS 8,000 2,100 10,000 6,000
Required: Determine the Activity rate for eachactivity cost pool. All work must be shown for credit.
Please label your answer as the activity rate for: Purchasing;Materials handling; & Production.
Activity
Activity Cost
Activity Base
Activity Base Total
Activity Cost / Total Activity Base
Purchasing
$250000
Number of Purchase Orders
8000
250000/8000=31.25
Material Handling
$500,000
Number of Moves
2100
500000/2100=238.09
Production
$1350000
Machine Hours
10000
$1350000/10000=135
Using the information from the activity rate you calculated, usethe following chart (as a guide- you do not need to replicate thetemplate) to determine the activity cost pertablet:
All work must be shown for credit.
A
B
C
D
E
F
G
1
7 inch tablet
10 inch tablet
2
Activity
Activity-Base
Usage Ã
Activity
Rate
Activity
= Cost
Activity-
Base
Usage Ã
Activity
Rate
Activity
= Cost
3
Purchasing
4
5
]
6
7
8
Activity cost per tablet
Using the information from the activity based costingproblem:
If traditional costing had been used and number of machine hourswere the allocation base, what would the single allocation rate be?Would applying a single allocation rate be a wise decision to applycosts in this scenario? Why or why not?
Adirondack Corporation is estimating activity costs associatedwith producing two different sized e-reader tablets. The indirectlabor can be traced to three separate activity pools. The budgetedactivity cost and activity base information, along with theestimated activity-base information, is provided below.
ActivityCost Activity Base
Purchasing $250,000 Number of purchase orders
Materials handling $500,000 Number of moves
Production 1,350,000 Machinehours
TOTAL $2,100,000
Number of Purchase Orders; Number of Moves; Machine Hours;Number of Units
7â tablet 3,000 1,500 2,500 2,500
10" tablet 5,000 600 7,500 3,500
TOTALS 8,000 2,100 10,000 6,000
Required: Determine the Activity rate for eachactivity cost pool. All work must be shown for credit.
Please label your answer as the activity rate for: Purchasing;Materials handling; & Production.
Activity | Activity Cost | Activity Base | Activity Base Total | Activity Cost / Total Activity Base |
Purchasing | $250000 | Number of Purchase Orders | 8000 | 250000/8000=31.25 |
Material Handling | $500,000 | Number of Moves | 2100 | 500000/2100=238.09 |
Production | $1350000 | Machine Hours | 10000 | $1350000/10000=135 |
Using the information from the activity rate you calculated, usethe following chart (as a guide- you do not need to replicate thetemplate) to determine the activity cost pertablet:
All work must be shown for credit.
A | B | C | D | E | F | G | |
1 | 7 inch tablet | 10 inch tablet | |||||
2 | Activity | Activity-Base Usage à | Activity Rate | Activity = Cost | Activity- Base Usage à | Activity Rate | Activity = Cost |
3 | Purchasing | ||||||
4 |
| ||||||
5 | ] | ||||||
6 | |||||||
7 | |||||||
8 | Activity cost per tablet | ||||||
Using the information from the activity based costingproblem:
If traditional costing had been used and number of machine hourswere the allocation base, what would the single allocation rate be?Would applying a single allocation rate be a wise decision to applycosts in this scenario? Why or why not?
Related questions
Activity Cost Pools, Activity Rates, and Product Costs usingActivity-Based Costing
Caldwell Home Appliances Inc. is estimating the activity costassociated with producing ovens and refrigerators. The indirectlabor can be traced into four separate activity pools, based ontime records provided by the employees. The budgeted activity costand activity-base information are provided as follows:
| Activity | Activity Pool Cost | Activity Base | |||
| Procurement | $144,480 | Number of purchase orders | |||
| Scheduling | 6,300 | Number of production orders | |||
| Materials handling | 30,420 | Number of moves | |||
| Product development | 23,400 | Number of engineering changes | |||
| Total cost | $204,600 | ||||
The estimated activity-base usage and unit information for twoproduct lines was determined as follows:
| Number of Purchase Orders | Number of Production Orders | Number of Moves | Number of Engineering Change Orders | Units | ||||||||||||
| Ovens | 570 | 230 | 460 | 130 | 1,390 | |||||||||||
| Refrigerators | 550 | 120 | 320 | 50 | 1,040 | |||||||||||
| Totals | 1,120 | 350 | 780 | 180 | 2,430 | |||||||||||
a. Determine the activity rate for eachactivity cost pool. If required, round your answers to the nearestdollar.
| Procurement (per purchase order) | $ |
| Scheduling (per production order) | $ |
| Materials handling (per move) | $ |
| Product development (per engineering change order) | $ |
b. Determine the activity-based cost per unitof each product. Round your answers to the nearest cent.
| Ovens | $ per unit |
| Refrigerators | $ per unit |
Stewart Marketing Inc. manufactures two products, A andB. Presently, the company uses a single plant-wide factory overheadrate for allocating overhead to products. However, management isconsidering moving to a multiple department rate system forallocating overhead. From the following information, determine theoverhead from both production departments allocated to each unit ofProduct B if the company uses a multiple department ratesystem.
| Overhead | Direct Labor Hours (dlh) | Product | ||
| A | B | |||
| Painting Dept. | $248,000 | 10,000 dlh | 16 dlh | 4 dlh |
| Finishing Dept. | 72,000 | 10,000 | 4 | 16 |
| Totals | $320,000 | 20,000 dlh | 20 dlh | 20 dlh |
| ======== | ========== | ====== | ====== | |
| $214.40 per unit |
| $99.20 per unit |
| $320.00 per unit |
| $425.60 per unit |
Phelan Systems Corporation is estimating activity costsassociated with producing disk drives, tapes drives, and wiredrives. The indirect labor can be traced to four separate activitypools. The budgeted activity cost and activity base information,along with the estimated activity-base information, is providedbelow.
| Activity Cost | Activity Base | ||||||||
| Procurement | $ 360,000 | Number of purchase orders | |||||||
| Scheduling | 240,000 | Number of production orders | |||||||
| Materials handling | 480,000 | Number of moves | |||||||
| Product development | 720,000 | Number of engineering changes | |||||||
| Production | 1,420,000 | Machine hours | |||||||
| Number of Purchase Orders | Number of Production Orders | Number of Moves | Number of Engineering Changes | Machine Hours | Number of Units | ||||
| Disk drives | 4,000 | 300 | 1,400 | 10 | 2,000 | 2,000 | |||
| Tape drives | 2,000 | 150 | 600 | 5 | 8,000 | 4,000 | |||
| Wire drives | 12,000 | 800 | 4,000 | 25 | 10,000 | 2,500 | |||
Determine the activity rate for product development perchange.
| $28,000 |
| $72,000 |
| $18,000 |
| $36,000 |
