Assignment
Baldwin Printers has contracts to complete weekly supplements required by fortyminus-two customers. For the year 2011, manufacturing overhead cost estimates total$1,840,000 for an annual production capacity of 20 million pages.
For 2011 Baldwin Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:
|
Cost pool
|
Manufacturing overhead
|
Activity level
|
|
Design changes
|
$ 520,000
|
400 design changes
|
|
Setups
|
1,040,000
|
8,000 setups
|
|
Inspections
|
280,000
|
14,000 inspections
|
|
Total manufacturing overhead costs
|
$1,840,000
|
|
During 2011, two customers, Wellington Drugs and Home Again, are expected to use the following printing services:
|
Cost pool
|
Manufacturing overhead
|
Activity level
|
|
Design changes
|
$ 520,000
|
400 design changes
|
|
Setups
|
1,040,000
|
8,000 setups
|
|
Inspections
|
280,000
|
14,000 inspections
|
|
Total manufacturing overhead costs
|
$1,840,000
|
|
What is the cost driver rate if manufacturing overhead costs are considered one large cost pool and are assigned based on 20 million pages of production capacity?
A. $0.10 per page
B. $0.092 per pageC. $1.84 per pageD. $0.07 per page
Using pages printed as the only overhead cost driver, what is the manufacturing overhead cost estimate for Wellington Drugs during 2011?
A. $11,200
B. $5,000C. $18,500D. $8,280
Assuming activityminus-cost pools are used, what are the activityminus-cost driver rates for design changes, setups, and inspections cost pools?
A. $286 per design change, $15.38 per setup, $20 per inspectionB. $1,300 per design change, $130.00per setup,$20 per inspectionC. $360 per design change, $3.20per setup, $6.40 per inspectionD. $1,680 per design change,$5.38 per setup, $42 per inspection
Using the three cost pools to allocate overhead costs, what is the total manufacturing overhead cost estimate for Wellington Drugs during 2011?
A. $9,100B. $10,192C. $5,400D. $10,800
When overhead costs are assigned using the single cost driver, number of pages printed, then
A. Wellington Drugs is grossly underbilled for the job, while other jobs will be unfairly overbilled.
B. Wellington Drugs will likely seek to do business with competitors in the future.
C. Wellington Drugs is unfairly overbilled for its use of printing resources.
D. Baldwin Printers will want to retain this highlyminus-profitable customer.