Question 1 - Healthy Day Company produces two beverages, PowerPunch and SlimLife. Data about these products follow.
|
PowerPunch
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SlimLife
|
|
Production volume
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11,5000 bottles
|
230,000 bottles
|
|
Liquid materials
|
1,200 gallons
|
25,000 gallons
|
|
Dry materials
|
1,220 pounds
|
18,000 pounds
|
|
Bottles
|
11,500 bottles
|
230,000 bottles
|
|
Labels
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3 labels per bottle
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1 label per bottle
|
|
Machine setups
|
700 setups
|
800 setups
|
|
Machine hours
|
170 MH
|
3,750 MH
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Additional data from its two production departments follow.
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Department
|
Driver
|
Cost
|
|
Mixing department
|
|
|
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Liquid materials
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Gallons
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$1,310
|
|
Dry materials
|
Pounds
|
8,649
|
|
Utilities
|
Machine hours
|
2,352
|
|
Bottling department
|
|
|
|
Bottles
|
Units
|
$72,450
|
|
Labeling
|
Labels per bottle
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10,580
|
|
Machine setup
|
Setups
|
45,000
|
Required -
1. Determine the cost of each product line using ABC.
2. What is the cost per bottle for PowerPunch and SlimLife?
3. Assume if PowerPunch sells for $7.25 per bottle, how much profit does the company earn per bottle of PowerPunch that it sells?
4. What is the minimum price that the company should set per bottle of SlimLife?
rev: 02_10_2012
$0.49 per bottle
$0.69 per bottle
$0.84 per bottle
Question 2 - Craftmore Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.
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Production Activity
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Indirect Labor
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Indirect Materials
|
Other Overhead
|
|
Grinding
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$340,000
|
|
|
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Polishing
|
|
$185,000
|
|
|
Product modification
|
600,000
|
|
|
|
Providing power
|
|
|
$255,000
|
|
System calibration
|
550,000
|
|
|
Additional information on the drivers for its production activities follows.
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Grinding
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19,000 machine hours
|
|
Polishing
|
19,000 machine hours
|
|
Product modification
|
1,800 engineering hours
|
|
Providing power
|
14,000 direct labor hours
|
|
System calibration
|
1,200 batches
|
Required:
1. Classify each activity as unit level, batch level, product level, or facility level.
Grinding
Polishing
Product modification
Providing power
System calibration
2. Compute the activity overhead rates using ABC. Form cost pools as appropriate.
|
Job 3175
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Job 4286
|
|
Number of units
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170 units
|
2,125 units
|
|
Machine hours
|
350 MH
|
3,500 MH
|
|
Engineering hours
|
33 eng hours
|
28 eng. hours
|
|
Batches
|
15 batches
|
45 batches
|
|
Direct labor hours
|
460 DLH
|
4,140 DLH
|
3. Determine overhead costs to assign to the following jobs using ABC.
4. What is the overhead cost per unit for Job 3175? What is the overhead cost per unit for Job 4286?
5. Assume if the company used a plantwide overhead rate based on direct labor hours, what is the overhead cost for each unit of Job 3175? Of Job 4286?
Question 3 - The following data are for the two products produced by Shakti Company.
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Product A
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Product B
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|
Direct materials
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$14 per unit
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$24 per unit
|
|
Direct labor hours
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0.5 DLH per unit
|
1.6 DLH per unit
|
|
Machine hours
|
0.4 MH per unit
|
1.2 MH per unit
|
|
Batches
|
90 batches
|
180 batches
|
|
Volume
|
10,000 units
|
2,000 units
|
|
Engineering modifications
|
9 modifications
|
45 modifications
|
|
Number of customers
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500 customers
|
400 customers
|
|
Market price
|
$34 per unit
|
$95 per unit
|
The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows.
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Costs
|
Driver
|
|
Indirect manufacturing
|
|
|
|
Engineering support
|
$24,000
|
Engineering modifications
|
|
Electricity
|
25,600
|
Machine hours
|
|
Setup costs
|
40,000
|
Batches
|
|
Nonmanufacturing
|
|
|
|
Customer service
|
71,000
|
Number of customers
|
Required:
1.1- Compute the manufacturing cost per unit using the plantwide overhead rate based on direct labor hours.
1.2- What is the gross profit per unit?
2.1- How much gross profit is generated by each customer of Product A and Product B using the plantwide overhead rate?
2.2- What is the cost of providing customer service to each customer?
3.1- Determine the manufacturing cost per unit of each product line using ABC.
3.2- What is the gross profit per unit?
4.1- How much gross profit is generated by each customer of Product A and Product B using ABC?
4.2- Is the gross profit per customer adequate for Product A?
4.3- Is the gross profit per customer adequate for Product B?
5. Which method of product costing gives better information to managers of this company?
Joborder costing
Activity based costing
Process costing
Question 4 - Tent Master produces two lines of tents sold to outdoor enthusiasts. The tents are cut to specifications in department A. In department B the tents are sewn and folded. The activities, costs, and drivers associated with these two manufacturing processes and its production support activities follow.
|
Process
|
Activity
|
Overhead cost
|
Driver
|
Quantity
|
|
Department A
|
Pattern alignment
|
$70,200
|
Batches
|
600
|
|
Cutting
|
61,250
|
Machine hours
|
12,500
|
|
Moving product
|
73,800
|
Moves
|
1,800
|
|
$205,250
|
|
|
|
Department B
|
Sewing
|
$366,560
|
Direct labor hours
|
4,640
|
|
Inspecting
|
27,500
|
Inspections
|
550
|
|
Folding
|
88,620
|
Units
|
31,650
|
|
$482,680
|
|
|
|
Support
|
Design
|
$520,000
|
Modification orders
|
400
|
|
Providing space
|
57,400
|
Square feet
|
8,200
|
|
Materials handling
|
223,200
|
Square yards
|
930,000
|
|
$800,600
|
|
|
Additional production information on the two lines of tents follows.
|
Pup Tent
|
Pop-Up Tent
|
|
Units produced
|
21,100 units
|
10,550 units
|
|
Moves
|
600 moves
|
1,200 moves
|
|
Batches
|
150 batches
|
450 batches
|
|
Number of inspections
|
220 inspections
|
330 inspections
|
|
Machine hours
|
8,000 MH
|
4,500 MH
|
|
Direct labor hours
|
2,900 DLH
|
1,740 DLH
|
|
Modification orders
|
100 modification orders
|
300 modification orders
|
|
Space occupied
|
4,100 square feet
|
4,100 square feet
|
|
Material required
|
450,000 square yards
|
480,000 square yards
|
Required:
1. Using a plantwide overhead rate based on direct labor hours, compute the overhead cost that is assigned to each pup tent and each pop-up tent.
2. Using the plantwide overhead rate, determine the total cost per unit for the two products if the direct materials and direct labor cost is $19 per pup tent and $22 per pop-up tent.
3.1- Assume the market price of the pup tent is $85 and the market price of the pop-up tent is $170, determine the gross profit / loss per unit for each tent.
3.2- What will be the management decide about the product Pup-tent?
Eliminate pup-tent
Retain pup-tent
4. Using ABC, compute the total cost per unit for each tent if the direct labor and direct materials cost is $19 per pup tent and $22 per pop-up tent.
5. Assume if the market price is $85 per pup tent and $170 per pop-up tent, determine the gross profit / loss per unit for each tent.