Question
In: Accounting
Baird Electronics produces video games in three market categories: commercial, home, and miniature. Baird has traditionally...
Baird Electronics produces video games in three market categories: commercial, home, and miniature. Baird has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers:
| Category | Total Pooled Cost | Types of Costs | Cost Driver | |||
| Unit | $ | 818,400 | Indirect labor wages, supplies, factory utilities, machine maintenance | Machine hours | ||
| Batch | 280,000 | Materials handling, inventory storage, labor for setups,packaging, labeling and shipping, scheduling | Number of production orders | |||
| Product | 212,000 | Research and development | Time spent by research department | |||
| Facility | 600,000 | Rent, general utilities, maintenance, facility depreciation, admin. salaries | Square footage | |||
Additional data for each of the product lines
follow:
| Commercial | Home | Miniature | Total | ||||||||||||
| Direct materials cost | $ | 37.00 | /unit | $ | 24.50 | /unit | $ | 30.90 | /unit | — | |||||
| Direct labor cost | $ | 13.60 | /hour | $ | 13.60 | /hour | $ | 18.70 | /hour | — | |||||
| Number of labor hours | 6,300 | 11,100 | 2,500 | 19,900 | |||||||||||
| Number of machine hours | 10,000 | 47,000 | 31,000 | 88,000 | |||||||||||
| Number of production orders | 290 | 2,000 | 510 | 2,800 | |||||||||||
| Research and development time | 13 | % | 23 | % | 64 | % | 100 | % | |||||||
| Number of units | 20,000 | 42,000 | 19,000 | 81,000 | |||||||||||
| Square footage | 25,000 | 54,000 | 21,000 | 100,000 | |||||||||||
Required
-
Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines.
-
Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs. Determine the combined cost of all three product lines.
(For all requirements, round intermediate calculations for allocation rates to 2 decimal places and all other calculations to the nearest whole dollar. Round "Cost per Unit" to 2 decimal places. Round your answers for "Total Cost" to the nearest whole dollar amount.)
|
Solutions
Expert Solution
| Type of Product | Total Cost | Cost per unit | |
| a. | Commercial | $ 1,616,800 | $ 80.84 |
| Home | $ 2,665,800 | $ 63.47 | |
| Miniature | $ 1,182,400 | $ 62.23 | |
| Combined Total | $ 5,465,000 | ||
| b. | Commercial | $ 1,311,560 | $ 65.58 |
| Home | $ 2,610,060 | $ 62.14 | |
| Miniature | $ 1,543,380 | $ 81.23 | |
| Combined Total | $ 5,465,000 |
(a)
| Commercial | Home | Miniature | |
| Direct materials cost | $ 740,000 | $ 1,029,000 | $ 587,100 |
| Direct labor cost | $ 272,000 | $ 571,200 | $ 355,300 |
| Overhead | $ 604,800 | $ 1,065,600 | $ 240,000 |
| Total Cost (a) | $ 1,616,800 | $ 2,665,800 | $ 1,182,400 |
| No of Units (b) | 20000 | 42000 | 19000 |
| Cost per unit (a/b) | $ 80.84 | $ 63.47 | $ 62.23 |
Overhead Rate = Total Overhead/Total Labor hours
= ($818400 + $280000 + $212000 + $600000)/19900 hours = $96 per DL hour
| Overhead assigned | |||
| Commercial | Home | Miniature | |
| Direct Labor Hours | 6300 | 11100 | 2500 |
| OH Rate | $96 | $96 | $96 |
| Overhead assigned | $604,800 | $1,065,600 | $240,000 |
(b)
| Commercial | Home | Miniature | |
| Direct materials cost | $ 740,000 | $ 1,029,000 | $ 587,100 |
| Direct labor cost | $ 272,000 | $ 571,200 | $ 355,300 |
| Overhead:- | |||
| Unit | $ 93,000 | $ 437,100 | $ 288,300 |
| Batch | $ 29,000 | $ 200,000 | $ 51,000 |
| Product | $ 27,560 | $ 48,760 | $ 135,680 |
| Facility | $ 150,000 | $ 324,000 | $ 126,000 |
| Total Cost (a) | $ 1,311,560 | $ 2,610,060 | $ 1,543,380 |
| No of Units (b) | 20000 | 42000 | 19000 |
| Cost per unit (a/b) | $ 65.58 | $ 62.14 | $ 81.23 |
| Category | Total Pooled Cost (a) | No of Cost Drivers (b) | Cost per Driver (a/b) |
| Unit | $ 818,400 | $ 88,000 | $ 9.30 |
| Batch | $ 280,000 | $ 2,800 | $ 100 |
| Product | $ 212,000 | $ 100 | $ 2,120 |
| Facility | $ 600,000 | $ 100,000 | $ 6 |
| $ 1,910,400 |
| Overhead assigned | ||||||
| Commercial | Home | Miniature | ||||
| Unit: | ||||||
| Machine Hours | 10000 | 47000 | 31000 | |||
| OH Rate | $ 9.30 | $ 9.30 | $ 9.30 | |||
| Overhead | $ 93,000 | $ 437,100 | $ 288,300 | |||
| Batch: | ||||||
| Production orders | $ 290 | $ 2,000 | $ 510 | |||
| OH Rate | $ 100 | $ 100 | $ 100 | |||
| Overhead | $ 29,000 | $ 200,000 | $ 51,000 | |||
| Product: | ||||||
| Time spent | $ 13 | $ 23 | $ 64 | |||
| OH Rate | $ 2,120 | $ 2,120 | $ 2,120 | |||
| Overhead | $ 27,560 | $ 48,760 | $ 135,680 | |||
| Facility: | ||||||
| Square Footage | $ 25,000 | $ 54,000 |
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