Question
In: Accounting
Bramble Visuals produces Tablets and Books. Total overhead costs traditionally have been allocated on the basis...
Bramble Visuals produces Tablets and Books. Total overhead costs
traditionally have been allocated on the basis of direct labor
hours. After implementing activity-based costing, managers
determined the following cost pools and cost drivers. They also
decided that general costs should no longer be allocated to
products.
|
Activity Pool |
Department Costs |
Cost Driver |
||||
|---|---|---|---|---|---|---|
|
Binding |
$297,000 | Number of units | ||||
|
Printing |
955,500 | Machine hours | ||||
|
Product design |
234,000 | Change orders | ||||
|
General |
727,500 | None | ||||
|
Total overhead costs |
$2,214,000 | |||||
Other information is as follows:
|
Tablets |
Books |
||||
|---|---|---|---|---|---|
|
Units |
62,500 | 30,000 | |||
|
Direct materials cost per unit |
$3.00 | $10 | |||
|
Direct labor cost per unit |
$7.00 | $14.00 | |||
|
Direct labor hours |
30,000 | 19,200 | |||
|
Machine hours |
150,000 | 144,000 | |||
|
Change orders |
1,500 | 2,400 |
Bramble’s managers have gathered the following information about
selling and administrative costs.
|
Activity Pool |
Total Cost |
Cost Driver |
||
|---|---|---|---|---|
|
Shipping |
$300,000 | Pounds shipped | ||
|
Advertising |
187,500 | Number of mailings | ||
|
Commissions |
168,125 | Sales price | ||
|
Total selling and administrative costs |
$655,625 |
|
Tablets |
Books |
||||
|---|---|---|---|---|---|
|
Weight |
20,000 pounds | 40,000 pounds | |||
|
Advertising mailings |
25,000 | 100,000 | |||
|
Sales commission |
5% of sales price | 8.00% of sales price | |||
|
Selling price per unit |
$35 | $75 |
Calculate ABC rates. (Round answers to 2 decimal
places, e.g. 15.25.)
|
S&A Cost ABC rates |
|||
|---|---|---|---|
|
Shipping |
$enter a dollar amount per pound rounded to 2 decimal places /lb. | ||
|
Advertising |
$enter a dollar amount per mailing rounded to 2 decimal places /mailing |
|
Product Cost ABC rates |
|||
|---|---|---|---|
|
Tablets |
$enter a dollar amount per unit rounded to 2 decimal places per unit | ||
|
Books |
$enter a dollar amount per unit rounded to 2 decimal places per unit |
Solutions
Expert Solution
1. ABC rates
Departmental cost
| Activity | Cost Pool | / | Cost Driver | = | Activity rate |
| Binding | $297,000 | / | 92,500 units | = | $3.21 per unit |
| Printing | $955,500 | / | 294,000 machine hours | = | $3.25 per machine hour |
| Product design | $234,000 | / | 3,900 changes orders | = | $60.00 per change order |
S&A Cost ABC rate
| Activity | Cost Pool | / | Cost Driver | = | Activity rate |
| Shipping | $300,000 | / | 60,000 pounds | = | $5.00 per pound |
| Advertising | $187,500 | / | 125,000 mailings | = | $1.50 per mailing |
2. Product cost
| Particulars | Tablets | Books |
| Direct materials cost per unit | $3.00 | $10.00 |
| Direct Labor cost per unit | $7.00 | $14.00 |
| Overhead cost per unit | $12.45 | $23.61 |
| Total Unit product cost | $22.45 | $47.61 |
| x Units sales | 62,500 | 30,000 |
| Total Product cost | $1,403,125 | $1,428,300 |
Working Notes:
Allocation of overhead cost
Tablets
| Activity | Cost Driver | x | Activity rate | = | Overhead cost |
| Binding | 62,500 units | x | $3.21 per unit | = | $200,625 |
| Printing | 150,000 machine hours | x | $3.25 per machine hour | = | $487,500 |
| Product design | 1,500 change orders | x | $60.00 per change order | = | $90,000 |
| Total Overhead costs | = | $778,125 |
Overhead cost per unit = $778,125 / 62,500 units = $12.45 per unit
Books
| Activity | Cost Driver | x | Activity rate | = | Overhead cost |
| Binding | 30,000 units | x | $3.21 per unit | = | $96,300 |
| Printing | 1,000 machine hours | x | $3.25 per machine hour | = | $468,000 |
| Product design | 2,400 change orders | x | $60.00 per change order | = | $144,000 |
| Total Overhead costs | = | $708,300 |
Overhead cost per unit = $708,300 / 30,000 units = $23.61 per unit
All the best...
ekkarill92 answered 2 years agoRelated Solutions
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