Question
In: Accounting
The Spurling Brigade Company produces custom widgets for its customers. The company uses an activity-based costing...
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The Spurling Brigade Company produces custom widgets for its customers. The company uses an activity-based costing system for its overhead costs. The company has provided the following data from its activity-based costing system.
Activity Cost Pool Total Cost Total ActivityAssembling………..... $101,574 16,200 machine hours
Job Support………… 32,724 1,800 jobs
Customer support…... 5,472 320 clients
Other………………. 100,000 Not applicable
Total………………. $239,770
The "Other" activity cost pool consists of costs of idle capacity & organization-sustaining costs. One particular customer, Vandal Inc., requested 32 jobs during the year for a total of 100 units, requiring a total of 192 machine hours. Each unit requires $0.40 in direct materials and $1.60 in direct labor. The customer was charged $2,200 for these jobs.
Round off all calculations to the nearest whole cent. -
A. Using ABC, compute the activity rate for the Assembling dept.
B. Using the same information for #10, compute the activity rate for Job Support.
C. Using the information for #10, compute the activity rate for Customer support.
D. Compute the total overhead cost charged to Vandal. Round to 2 decimal places.
E. Now compute the customer (gross) margin for Vandal Inc. rounding to 2 decimal places. Give as positive or negative number.
F. What is the (product) cost for Spurling to produce one unit for Vandal under ABC? Round to 2 decimal places. Give as positive number.
G. If Spurling used traditional costing instead of ABC and allocates based on machine hours, what would be the customer margin for Vandal Inc.? Give as positive or negative number. Round to 2 decimal places
Solutions
Expert Solution
| Activity Cost Pool | Total Cost | Total Activity | Activity Rate | |
| a | Assembling | 101,574 | 16200 | $ 6.27 |
| b | Job Support | 32,724 | 1800 | $ 18.18 |
| c | Customer support | 5,472 | 320 | $ 17.10 |
| 100 Units | |
| Direct Material | $ 40.00 |
| Direct Labour | $ 160.00 |
| Assembling | $ 1,203.84 |
| Job Support | $ 581.76 |
| Customer support | $ 17.10 |
| (D) Total Overhead Cost | $ 2,002.70 |
| Price charged to customer | $ 2,200.00 |
| (E)Gross Margin | $ 197.30 |
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