Managerial Accounting - Chapter 17 Wiley

Spud, Inc. a manufacturer of gourmet potato chips, employs activity-based costing. The budgeted data for each of the activity cost pools is provided below for the year 2017. Activity Cost Pools EstimatedOverhead Expected Use ofCost Drivers per Activity Ordering and receiving $73,800 12,000 orders Food processing 420,750 55,000 machine hours Packaging 1,365,000 420,000 labor hours For 2017, the company had 10,000 orders and used 48,000 machine hours, and labor hours totaled 490,000. (a) Calculate the overhead rates for each activity. (b) What is the total overhead applied?

(a) Ordering and receiving $73,800 / 12,000 = $6.15 per order Food processing 420,750 / 55,000 = $7.65 per machine hour Packaging 1,365,000 / 420,000 = $3.25 per labor hour (b) (10,000 x 6.15) + (48,000 x 7.65) +(490,000 x 3.25) = 2,021,200 Total overhead applied.

Weisman, Inc. uses activity-based costing as the basis for information to set prices for its six lines of seasonal coats. Activity Cost Pools EstimatedOverhead Expected Use ofCost Drivers per Activity Designing $443,000 14,900 designer hours Sizing and cutting 4,100,000 161,000 machine hours Stitching and trimming 1,410,000 81,500 labor hours Wrapping and packing 327,000 30,500 finished units Compute the activity-based overhead rates using the following budgeted data for each of the activity cost pools

Designing $443,000 / 14,900 = $29.73 per designer hour Sizing and cutting 4,100,000 / 161,000 = $25.47 per machine hour Stitching and trimming 1,410,000 / 81,500 = $17.30 per labor hour Wrapping and packing 327,000 / 30,500 = $10.72 per finished unit

Factory Machine Maintenance

Machine Hours Used

Morgana Company identifies three activities in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is $191,700, $375,000, and $108,000, respectively. The cost driver for each activity and the expected annual usage are number of setups 2,700, machine hours 25,000, and number of inspections 2,000. Compute the overhead rate for each activity. Machine setups $____________ number per setup Machining $__________ per machine hour Inspections $____________ per inspection

Machine Setups Total Overhead / Number of setups 191,700 / 2,700 = $71 per set up Machining Total Overhead / Number of hours 375,000 / 25,000 = $15 per machine hour Inspections Total Overhead / Number of inspections 108,000 / 2,000 = $54 per inspections

Factory Supervision

Number of Employees

Quality Control

Number of Inspections

Materials Handling

Number of Requisitions

Machine Setups

Number of Setups