ACC 8.5 Assigning overhead to production using ABC
Bird's Eye View manufactures three different sizes of bird cages: small (for finches and canaries), medium (for cockatiels and small parrots), and large (for cockatoos and other large parrots). The company has recently implemented an activity-based costing system. Bird's Eye View has identified five different production activities as well as the best cost driver for each activity. Each activity and driver is listed below, along with the budgeted amount that is associated with each activity for next year. Budgeted Activity Cost Driver Costs Materials handling Labor hours $ 55,000 Automated processing Machine hours 40,000 Plastic parts insertion Number of parts 6,000 Inspections Labor hours 29,000 Packaging Orders shipped 31,000 Total indirect manufacturing cost $161,000 The following information relates to each size of bird cage and next year's anticipated manufacturing operations: Large Medium Small Units to be produced 350 400 600 Orders to be shipped 180 200 250 Number of parts per unit 8 6 4 Machine hours per unit 4 2 1 Labor hours per unit 2 2 2 Under an activity-based costing system, what is the per unit cost for manufacturing overhead of a medium cage (rounded)?
$120 Cost per cost driver: Total Cost per Cost Driver Large Medium Small Total costs driver Labor hours (materials) 700 800 1,200 2,700 $55,000 $20.37 Machine hours 1,400 800 600 2,800 40,000 14.29 Number of parts 2,800 2,400 2,400 7,600 6,000 0.79 Labor hours (inspections) 700 800 1,200 2,700 29,000 10.74 Orders shipped 180 200 250 630 31,000 49.21 Total manufacturing overhead cost of medium cages: Cost per Number of Activity driver drivers Total Materials handling $20.37 800 $16,296 Automated processing 14.29 800 11,432 Plastic parts insertion 0.79 2,400 1,896 Inspections 10.74 800 8,592 Packaging 49.21 200 9,842 Total $48,058 Manufacturing cost per unit: $48,058 / 400 = $120 (rounded)
The Dormir Company uses an activity-based costing system to account for its process of manufacturing camping tents. Each tent has $140 of direct materials, includes 15 parts, and requires 3 hours of machine time. Information on conversion costs, manufacturing activities, and cost drivers is listed below. Cost Per Manufacturing Activity Cost Driver Unit Material handling Number of parts $ 3.00 Sewing Machine hours 20.00 Assembling Number of parts 1.00 Testing Number of finished units 8.00 The total manufacturing cost per tent is:
$268 Total manufacturing cost: $140 + (15 x $3) + (3 x $20) + (15 x $1) + 8 = $268
The Dormir Company uses an activity-based costing system to account for its process of manufacturing camping tents. Each tent has $140 of direct materials, includes 15 parts, and requires 3 hours of machine time. Information on conversion costs, manufacturing activities, and cost drivers is listed below. Cost Per Manufacturing Activity Cost Driver Unit Material handling Number of parts $ 3.00 Sewing Machine hours 20.00 Assembling Number of parts 1.00 Testing Number of finished units 8.00 The cost of material handling per tent is:
$45.00 Cost of material handling: 15 parts x $3 = $45.00
The Dormir Company uses an activity-based costing system to account for its process of manufacturing camping tents. Each tent has $140 of direct materials, includes 15 parts, and requires 3 hours of machine time. Information on conversion costs, manufacturing activities, and cost drivers is listed below. Cost Per Manufacturing Activity Cost Driver Unit Material handling Number of parts $ 3.00 Sewing Machine hours 20.00 Assembling Number of parts 1.00 Testing Number of finished units 8.00
$60.00 Cost of sewing per tent: 3 hrs x $20 = $60.00
BigView Monitors manufactures three different sizes of computer monitors: 15-inch, 17-inch, and 20-inch. The company has recently implemented an activity-based costing system. BigView has identified five different production activities as well as the best cost driver for each activity. Each activity and driver is listed below, along with the budgeted amount that is associated with each activity for next year. Budgeted Activity Cost Driver Costs Parts handling Number of parts $ 90,000 Parts insertion Number of parts 990,000 Automated processing Machine hours 336,000 Testing Labor hours 68,000 Packaging Orders shipped 68,000 Total indirect manufacturing cost $1,552,000 The following information relates to each size of monitor and next year's anticipated manufacturing operations: 20-inch 17-inch 15-inch Units to be produced 2,000 3,000 5,000 Orders to be shipped 200 500 800 Number of parts per unit 30 20 10 Machine hours per unit 4 2 1 Labor hours per unit 2 2 2 Under an activity-based product costing system, what is the per unit cost for manufacturing overhead of 15-inch monitors (rounded)?
$95 Cost per cost driver: Total Cost per Cost Driver 20-inch 17-inch 15-inch Total costs driver Number of parts (parts handling) 60,000 60,000 50,000 170,000 $ 90,000 $ 0.53 Number of parts (parts insertion) 60,000 60,000 50,000 170,000 990,000 5.82 Machine hours 8,000 6,000 5,000 19,000 336,000 17.68 Labor hours 4,000 6,000 10,000 20,000 68,000 3.40 Orders shipped 200 500 800 1,500 68,000 45.33 Total manufacturing overhead cost for 15-inch monitors: Cost per Number of Activity driver drivers Total Parts handling $ 0.53 50,000 $ 26,500 Parts insertion 5.82 50,000 291,000 Automated processing 17.68 5,000 88,400 Testing 3.40 10,000 34,000 Packaging 45.33 800 36,264 Total $476,164 Manufacturing cost per unit: $476,164 / 5,000 = $95 (rounded)
