Question 1: (allocating costs using ABC,product profit margin)
Generic Motors Corporation has two product lines, A and B. Itscontribution margin statement for last year is as follows:
Product A Product B Total sales volume (units) 150 300 450 Revenue $6,000 $30,000 $36,000 Variable costs: direct materials $1,200 $6,000 $7,200 direct labor $3,000 $12,000 $15,000 Contribution margin $1,800 $12,000 $13,800 Fixed costs $11,700 Profit $2,100
Generic Motors uses ABC to allocate the fixed costs. It examinedthe main activities in the firm, and decided to break up the totalfixed costs of $11,700 into 3 cost pools:
* "labor-related" - the total cost in this pool is $3,000,allocated based on direct labor dollars
* "sales-related" - the total cost in this pool is $2,700,allocated based on number of units
* "production setups" - the total cost in this pool is $6,000,allocated based on the number of production batches. A is producedin batches of 10 units, and B is produced in batches of 5units.
Required:
a) for each cost pool, compute the allocation rateand the amounts allocated to product A and product B. (assume thatpractical capacity = total activity volume for each pool)
(hint: The amounts allocated to A and B from each pool shouldadd up to the total cost in that pool. To allocate the costs in the"production setups" pool, you will have to compute the number ofbatches. If the total number of batches for A and B does not add upto 75, you are doing something wrong).
* "labor-related" pool:
allocation rate = $ ______ per DL$
FC allocated to A = $ ______
FC allocated to B = $ ______
* "sales-related" pool:
allocation rate = $ ______ per unit
FC allocated to A = $ ______
FC allocated to B = $ ______
* "production setups" pool:
allocation rate = $ ______ per batch
FC allocated to A = $ ______
FC allocated to B = $ ______
b) using the allocated costs from (a), compute theprofit margin for product A and product B.
If you get a negative number, enter it with a minus sign, i.e.,enter negative $100 as -100, not ($100)
profit margin for A = $ ______
profit margin for B = $ ______
Question 1: (allocating costs using ABC,product profit margin)
Generic Motors Corporation has two product lines, A and B. Itscontribution margin statement for last year is as follows:
| Product A | Product B | Total | |
| sales volume (units) | 150 | 300 | 450 |
| Revenue | $6,000 | $30,000 | $36,000 |
| Variable costs: | |||
| direct materials | $1,200 | $6,000 | $7,200 |
| direct labor | $3,000 | $12,000 | $15,000 |
| Contribution margin | $1,800 | $12,000 | $13,800 |
| Fixed costs | $11,700 | ||
| Profit | $2,100 |
Generic Motors uses ABC to allocate the fixed costs. It examinedthe main activities in the firm, and decided to break up the totalfixed costs of $11,700 into 3 cost pools:
* "labor-related" - the total cost in this pool is $3,000,allocated based on direct labor dollars
* "sales-related" - the total cost in this pool is $2,700,allocated based on number of units
* "production setups" - the total cost in this pool is $6,000,allocated based on the number of production batches. A is producedin batches of 10 units, and B is produced in batches of 5units.
Required:
a) for each cost pool, compute the allocation rateand the amounts allocated to product A and product B. (assume thatpractical capacity = total activity volume for each pool)
(hint: The amounts allocated to A and B from each pool shouldadd up to the total cost in that pool. To allocate the costs in the"production setups" pool, you will have to compute the number ofbatches. If the total number of batches for A and B does not add upto 75, you are doing something wrong).
* "labor-related" pool:
allocation rate = $ ______ per DL$
FC allocated to A = $ ______
FC allocated to B = $ ______
* "sales-related" pool:
allocation rate = $ ______ per unit
FC allocated to A = $ ______
FC allocated to B = $ ______
* "production setups" pool:
allocation rate = $ ______ per batch
FC allocated to A = $ ______
FC allocated to B = $ ______
b) using the allocated costs from (a), compute theprofit margin for product A and product B.
If you get a negative number, enter it with a minus sign, i.e.,enter negative $100 as -100, not ($100)
profit margin for A = $ ______
profit margin for B = $ ______
Related questions
#6
Younan Corporation manufactures two products: Product E47F andProduct D02M. The company is considering implementing anactivity-based costing (ABC) system that allocates itsmanufacturing overhead to four cost pools. The following additionalinformation is available for the company as a whole and forProducts E47F and D02M.
| Activity CostPool | ActivityMeasure | Total Cost | Total Activity | ||
| Machining | Machine-hours | $ | 165,000 | 11,000 | MHs |
| Machine setups | Number of setups | $ | 150,000 | 250 | setups |
| Product design | Number of products | $ | 70,000 | 2 | products |
| Order size | Direct labor-hours | $ | 310,000 | 10,000 | DLHs |
| ActivityMeasure | ProductE47F | ProductD02M |
| Machine-hours | 5,000 | 6,000 |
| Number of setups | 200 | 50 |
| Number of products | 1 | 1 |
| Direct labor-hours | 4,000 | 6,000 |
Using the ABC system, the percentage of the total overhead costthat is assigned to Product D02M is closest to:
rev: 03_17_2018_QC_CS-119201
22.30%
49.06%
26.76%
50.00%
#7
Tomasini Corporation has provided the following data from itsactivity-based costing accounting system:
| Supervisory wages | $ | 660,000 |
| Factory supplies | $ | 280,000 |
Distribution of Resource Consumption across Activity CostPools:
| Activity Cost Pools | BatchProcessing | Unit Processing | Other | Total | |
| Supervisory wages | 20% | 70% | 10% | 100% | |
| Factory supplies | 45% | 35% | 20% | 100% | |
The "Other" activity cost pool consists of the costs of idlecapacity and organization-sustaining costs that are not assigned toproducts.
How much supervisory wages and factory supplies cost would NOTbe assigned to products using the activity-based costingsystem?
Garrison 16e Rechecks 2018-07-24
$280,000
$660,000
$122,000
$0
#9
Addleman Corporation has an activity-based costing system withthree activity cost pools--Processing, Supervising, and Other. Inthe first stage allocations, costs in the two overhead accounts,equipment expense and indirect labor, are allocated to the threeactivity cost pools based on resource consumption. Data used in thefirst stage allocations follow:
| Overhead costs: | |||||||
| Equipment expense | $ | 73,000 | |||||
| Indirect labor | $ | 1,000 | |||||
Distribution of Resource Consumption Across Activity CostPools:
| Activity Cost Pools | |||||
| Processing | Supervising | Other | |||
| Equipment expense | 0.20 | 0.10 | 0.70 | ||
| Indirect labor | 0.20 | 0.20 | 0.60 | ||
Processing costs are assigned to products using machine-hours(MHs) and Supervising costs are assigned to products using thenumber of batches. The costs in the Other activity cost pool arenot assigned to products. Activity data for the company's twoproducts follow:
Activity:
| MHs(Processing) | Batches(Supervising) | |
| Product W3 | 7,600 | 100 |
| Product H3 | 2,400 | 900 |
| Total | 10,000 | 1,000 |
Finally, the costs of Processing and Supervising are combinedwith the following sales and direct cost data to determine productmargins.
Sales and Direct Cost Data:
| Product W3 | Product H3 | |||||||||
| Sales (total) | $ | 159,500 | $ | 154,100 | ||||||
| Direct materials (total) | $ | 66,300 | $ | 55,300 | ||||||
| Direct labor (total) | $ | 77,800 | $ | 84,100 | ||||||
The activity rate for the Supervising activity cost pool underactivity-based costing is closest to:
Garrison 16e Rechecks 2018-07-24
$7.50 per batch
$74.00 per batch
$1.11 per batch
$1.00 per batch
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 | $ |
