Question

In: Accounting

She developed an ABC system very similar to the one used by Kane​'s chief rival. Part...

She developed an ABC system very similar to the one used by Kane​'s
chief rival. Part of the reason Johnson developed the ABC system was because Kane​'s
profits had been declining even though the company had shifted its product mix toward the product that had appeared most profitable under the old system. Before adopting the new ABC​ system, the company had used a plantwide overhead rate based on direct labor hours that was developed years ago.

Standard

Deluxe

Parts per wheel. . . . . . . . . . . . . . . . . . . .

4.0

6.0

Setups per 1,000 wheels. . . . . . . . . . . . . . .

20.0

20.0

Finishing direct labor hours per wheel. . . . .

1.0

3.0

Total direct labor hours per wheel. . . . . . . .

2.7

3.8

The​ company's managers expect to produce 1,000 units of each model during the year.

Activity Cost:

Activity.... Allocation Base........ Allocation Rate

Materials handling. . . .Number of parts.... $4.50 per part

Machine setup. . . . . . .Number of setups.... $325.00 per setup

Insertion of parts. . . . .Number of parts.......$31.00 per part

Finishing. . . . . . . . . . . .Finishing direct labor hours....$51.00 per hour

Requirement 1. Compute the total budgeted manufacturing overhead cost for the upcoming year. ​(Enter the rates to two decimal​ places.)

Kane Corporation

Total Budgeted Indirect Manufacturing Costs

Budgeted Quantity of

Activity Cost

Total Budgeted

Activity

Cost Allocation Base

Allocation Rate

Indirect Cost

Materials handling

Machine setups

Insertion of parts

Finishing

Total budgeted indirect cost

Requirement 2. Compute the manufacturing overhead cost per wheel of each model using ABC. ​(Round the cost allocation base to three decimals and cost per wheel to the nearest​ cent.)

Kane Corporation

ABC Indirect Manufacturing Cost per Unit

Cost

Quantity of Cost Allocation

Allocated Activity

Activity

Allocation Rate

Base Used By:

Cost Per Wheel

Standard

Deluxe

Standard

Deluxe

Materials handling

Machine setup

Insertion of parts

Finishing

Total ABC allocated indirect cost

Requirement 3. Compute the​ company's traditional plantwide overhead rate. Use this rate to determine the manufacturing overhead cost per wheel under the traditional system.  

Begin by identifying the formula to compute the current plantwide manufacturing overhead​ rate, then compute the rate. ​(Round your answer to the nearest​ cent.)

/

=

Plantwide overhead rate

/

=

per DL hour

Now use the plantwide overhead rate to determine the manufacturing overhead cost per wheel. ​(Round your answers to the nearest​ cent.)

x

=

Manufacturing overhead

Standard

x

=

Deluxe

x

=

Solutions

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