MBA 508 - Accounting Assignment- University of North Carolina Wilmington.
Case Analysis
Outstanding Outdoor Product Sales (OOPS) manufactures camping and related equipment and currently offers three products (tents, backpacks, and tarps). OOPS has three manufacturing departments (cutting, assembling, and sewing), and generally utilizes a two-step activity-based costing (ABC) process; overhead (OH) costs first get allocated to departments (activities) and then from departments to products.
OOPS had the following OH costs during the most recent period:
• Advertising & Promotion $ 20,400
• Custodial Services 22,200
• Equipment Depreciation 35,200
• Equipment Maintenance 7,800
• Facility Rent 51,600
• President's Salary & Benefits 129,000
• Quality Inspection 3,700
• Staff Training 7,100
• Supervisor Salaries & Benefits 94,300
• Utilities 42,860
Total OH Costs $ 414,160
OOPS has a variety of measured activities that are available for use as cost drivers. Following are the available cost drivers and the volume of each measure for the three departments for the most recent period:
|
Measured Activity
|
Cutting
|
Assembling
|
Sewing
|
Total Volume
|
|
Direct Labor Hours
|
1,620 DLHs
|
740 DLHs
|
980 DLHs
|
3,340 DLHs
|
|
Direct Materials Added
|
540 lbs
|
3,150 lbs
|
--
|
3,690 lbs
|
|
Employees
|
17
|
5
|
6
|
28
|
|
Machine Hours
|
--
|
16,200 MHs
|
10,300 MHs
|
26,500 MHs
|
|
Machine Setups
|
--
|
48
|
12
|
60
|
|
Product Defects
|
80
|
125
|
84
|
289
|
|
Space Occupied
|
2,800 sf
|
1,200 sf
|
2,000 sf
|
6,000 sf
|
One additional option is to split a particular OH cost amount equally between departments (essentially using the number of departments as the cost driver). Not every available measured activity must be used as a cost driver, and a particular measured activity may be used as the cost driver for more than one OH cost component.
In addition to the overhead costs that get allocated to the departments, OOPS also incurred the following direct costs (for labor and materials) in each department in the most recent period:
• Cutting $ 722,400
• Assembling 570,900
• Sewing 188,450
In the second step of this ABC system, allocated OH costs as well as direct costs incurred in each department are allocated from departments to products based exclusively on DLHs (for simplicity). Following are the quantities of DLHs in each department for each product:
|
|
Cutting
|
Assembling
|
Sewing
|
Totals
|
|
Tents
|
660 DLHs
|
220 DLHs
|
480 DLHs
|
1,360 DLHs
|
|
Backpacks
|
740 DLHs
|
520 DLHs
|
140 DLHs
|
1,400 DLHs
|
|
Tarps
|
220 DLHs
|
-- .
|
360 DLHs
|
580 DLHs
|
|
Totals
|
1,620 DLHs
|
740 DLHs
|
980 DLHs
|
3,340 DLHs
|
REQUIRED:
1) Compute the OH cost for each product using a single volume-based driver (DLHs) for all OH costs, rather than ABC. (That is, allocate OH costs directly to the products based on DLHs, and ignore direct costs for this requirement.)
2) Using the two-step ABC process:
a. Identify and explain appropriate cost drivers for each OH cost pool.
b. Compute the predetermined overhead rate (POHR) for each OH cost pool.
c. Use the POHRs for all of the OH cost pools and allocate OH costs to departments for the first step in the process.
d. Combine the allocated OH costs with the direct costs in each department and compute allocation rates for the second step in the process (each based on DLHs); then allocate all costs to the products 20 points
3) Draw a sketch showing how costs are allocated to products using the two-step ABC process (first from OH cost pools to departments and then from departments to products), including indication of the selected cost drivers and the various allocation rates. Also, what OH costs could maybe be pooled together to simplify this ABC process?
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.
Attachment:- Assignment-Data.rar