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In: Accounting
After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing...
After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 106,000 units of the Sport model and 43,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 31 percent.
Cost Drivers and Cost Driver Volumes—CenterPoint Manufacturing Facility
| Cost Driver Volume | ||||
| Activity | Cost Driver | Sport | Pro | Total |
| Assembly building | ||||
| Assembling | Machine-hours | 6,600 | 30,600 | 37,200 |
| Setting up machines | Setup hours | 46 | 460 | 506 |
| Handling material | Production runs | 14 | 46 | 60 |
| Packaging building | ||||
| Inspecting and packing | Direct labor-hours | 62,400 | 24,000 | 86,400 |
| Shipping | Number of shipments | 106 | 212 | 318 |
Third Quarter Unit Cost Report, Activity-Based Costing—CenterPoint Manufacturing Facility
| Sport | Pro | ||||||
| Direct material | $ | 1,506,000 | $ | 2,412,000 | |||
| Direct labor | |||||||
| Assembly | $ | 756,000 | $ | 612,000 | |||
| Packaging | 996,000 | 372,000 | |||||
| Total direct labor | $ | 1,752,000 | $ | 984,000 | |||
| Direct costs | $ | 3,258,000 | $ | 3,396,000 | |||
| Overhead | |||||||
| Assembly building | |||||||
| Assembling (@ $30 per MH) | $ | 198,000 | $ | 918,000 | |||
| Setting up machine (@ $900 per setup hour) | 41,400 | 414,000 | |||||
| Handling material (@ $3,000 per run) | 42,000 | 138,000 | |||||
| Packaging building | |||||||
| Inspecting and packing (@ $5 per direct labor-hour) | 312,000 | 120,000 | |||||
| Shipping (@ $1,320 per shipment) | 139,920 | 279,840 | |||||
| Total ABC overhead | $ | 733,320 | $ | 1,869,840 | |||
| Total ABC cost | $ | 3,991,320 | $ | 5,265,840 | |||
| Number of units | 106,000 | 43,000 | |||||
| Unit cost | $ | 37.65 | $ | 122.46 | |||
Required:
a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900.
| Model | Total ABC Overhead |
| Sport | ? |
| Pro | ? |
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ekkarill92 answered 1 year agoRelated Solutions
After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing...
After reviewing the new activity-based costing system that Nancy
Chen has implemented at IVC's CenterPoint manufacturing facility,
Tom Spencer, the production supervisor, believes that he can reduce
production costs by reducing the time spent on machine setups. He
has spent the last month working with employees in the plant to
change over the machines more quickly with the same reliability. He
plans to produce 100,000 units of the Sport model and 40,000 units
of the Pro model in the first...
After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing...
After reviewing the new activity-based costing system that Nancy
Chen has implemented at IVC's CenterPoint manufacturing facility,
Tom Spencer, the production supervisor, believes that he can reduce
production costs by reducing the time spent on machine setups. He
has spent the last month working with employees in the plant to
change over the machines more quickly with the same reliability. He
plans to produce 115,000 units of the Sport model and 47,500 units
of the Pro model in the first...
After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing...
After reviewing the new activity-based costing system that Nancy
Chen has implemented at IVC's CenterPoint manufacturing facility,
Tom Spencer, the production supervisor, believes that he can reduce
production costs by reducing the time spent on machine setups. He
has spent the last month working with employees in the plant to
change over the machines more quickly with the same reliability. He
plans to produce 120,000 units of the Sport model and 50,000 units
of the Pro model in the first...
Once an activity-based costing system has been developed and implemented in a company, will that system...
Once an activity-based costing system has been developed and
implemented in a company, will that system be appropriate for the
long term? Why or why not?
Rusties Company recently implemented an activity-based costing system.
Rusties Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company’s five activity cost pools:
Activity Cost Pool
Activity Measure
ExpectedOverhead Cost
ExpectedActivity
Labor-related
Direct labor-hours
$
24,912
2,076
DLHs
Purchase orders
Number of orders
$
1,070
535
orders
Product testing
Number of tests
$
4,550
325
tests
Template etching
Number of templates
$
770
35
templates
General factory
Machine-hours
$
52,500
10,500
MHs...
Based on activity based costing article, briefly summarise how the costing system was designed and implemented...
Based on activity based costing article, briefly summarise how
the costing system was designed and implemented in your real-life
organisation?
Adria Company recently implemented an activity-based costing system. At the beginning of the year, management made...
Adria Company recently implemented an activity-based costing
system. At the beginning of the year, management made the following
estimates of cost and activity in the company’s five activity cost
pools:
Activity Cost Pool
Activity
Measure
Expected
Overhead Cost
Expected
Activity
Labor-related
Direct labor-hours
$
52,000
6,500
DLHs
Purchase orders
Number of orders
$
13,000
2,600
orders
Material receipts
Number of receipts
$
11,200
800
receipts
Relay assembly
Number of relays
$
16,000
1,600
relays
General factory
Machine-hours
$
342,000
38,000...
Explain how activity-based costing would be implemented using an ERP system. In doing that, explain the...
Explain how activity-based costing would be implemented using an
ERP system. In doing that, explain the advantage of using ERP with
activity-based costing.
When activity based costing is implemented, the initial outcome is normally that: A. The cost of...
When activity based costing is implemented, the initial outcome
is normally that:
A. The cost of all products will be higher.
B. The cost of all products will be lower
C. The cost of low volume products will be higher and the cost
of high volume products will be lower
D. The cost of low volume products will be lower and the cost of
high volume products will be higher.
Explain three (3) advantages in using activity based costing system for a manufacturing company.
Explain three
(3) advantages in using activity based costing system
for a manufacturing
company.
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