Question

In: Accounting

Use the following information regarding Musketeer Novelties: Activity Activity Costs Cost driver Product design $212,000 1,500...

Use the following information regarding Musketeer Novelties:

Activity Activity Costs Cost driver

Product design $212,000 1,500 design hours

Product scheduling $180,000 400 Set ups

Machining $600,000 5,000 machine hours

Material Handling $160,000 4,000 Pallet moved

Cost and activity with procuring 2,000 units of a Blueblob Bobblehead are as follows:

Direct Materials: $5,400

Direct Labor: $1,200

Design Hours: 5

Set-Ups: 3

Labor Hours 40

Machine Hours 18

Pallets Moved 10

United produced 400

1.) Develop activity rates for each of the four activities of Musketeer Novelties

2.) What is the product cost for ONE Blueblob Bobblehead using ABC (ACTIVITY BASE COSTING) rates for applying overhead?

3.)What is the product cost of one Blueblob bobblehead if Musketeer Novelties uses a plant-wide overhead rate based on machine hours. (assume 5,000 machine hours plant-wide)

Solutions

Expert Solution

1)

Activity Activity Cost $ Cost Driver Activity Rates $
Product design 212000 1500 141.33 per design hour
Product scheduling 180000 400 450 per set up
Machining 600000 5000 120 per machine hour
Material handling 160000 4000 40 per pallet moved

2)

Activity Activity Rates $ Cost Driver Allocated Overhead $
Product design 141.33 5 706.65
Product scheduling 450 3 1350
Machining 120 18 2160
Material handling 40 10 400
Total $ 4616.65
Direct materials 5400
Direct labor 1200
Overheads 4616.65
Total cost $ 11216.65
Number of units produced 2000
Unit product cost $ 5.61

3) Plant-wide overhead rate = Total overheads/Total machine hours = ($212000 + $180000 + $600000 + $160000)/5000 = $1152000/5000 = $230.40

Overhead applied = 18 x $230.40 = $4147.20

Direct materials 5400
Direct labor 1200
Overheads 4147.2
Total cost $ 10747.2
Number of units produced 2000
Unit product cost $ 5.37

Note: Amounts are rounded off to 2 decimal places in the absence of specific instructions regarding the same. Kindly round off as required.


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