Question
In: Accounting
Valley View Trailmasters makes two types of tents for mountain camping, the Explorer and the Climber....
Valley View Trailmasters makes two types of tents for mountain camping, the Explorer and the Climber. Data concerning the two product lines is presented in the table below:
|
EXPLORER |
CLIMBER |
|
|---|---|---|
|
Sales price per unit |
$390 |
$615 |
|
Direct materials per unit |
$92 |
$115 |
|
Direct labor per unit |
$51 |
$75 |
|
Estimated annual production |
4,000 units |
9,000 units |
The company has always employed a tradition costing system in which manufacturing overhead is applied to units based on machine hours. Estimated data concerning manufacturing overhead and direct labor hours for the upcoming year appear below:
Estimated total manufacturing overhead $484,746
Estimated total machine hours 1,000
The company is considering replacing its traditional costing system with an activity based costing system that would assign its indirect product costs to four activity cost pools. Information about the amount assigned to these cost pools, the identified cost driver for each and usage of the cost drivers by the two product lines is presented in the following table:
|
ACTIVITY |
TOTAL COST |
COST DRIVER |
TOTAL |
EXPLORER |
CLIMBER |
|---|---|---|---|---|---|
|
Machine maintenance |
$78,840 |
Machine hours |
1,000 |
350 |
650 |
|
Batch setups |
$136,364 |
Setups |
146 |
60 |
86 |
|
Quality control |
$163,020 |
Inspections |
1,650 |
975 |
675 |
|
Technical support |
$106,522 |
Technical support calls |
964 |
352 |
612 |
|
Total manufacturing overhead cost |
$484,746 |
INSTRUCTIONS: Use EXCEL FROMULAS (Show them to next the value) to calculate the following amounts in the spaces provided on your template.
1. Calculate the predetermined overhead rate using the traditional volume-based costing system.
2. Calculate the total amount of overhead cost that would be assigned to each product line under the company’s traditional costing system.
3. Calculate the gross margin per unit for each product line using traditional volume-based costing.
4. Calculate the activity rate for each cost pool using activity-based costing.
5. Calculate the total amount of overhead cost that would be assigned to each product line using activity-based costing.
6. Calculate the gross margin per unit for each product line under the proposed activity based costing system.
Here is the attached template:
Show formulas as well as the values.
| EXPLORER | CLIMBER | ACTIVITY | TOTAL COST | COST DRIVER | TOTAL | EXPLORER | CLIMBER | ||
| Sales price per unit | $390 | $615 | Machine maintenance | $78,840 | Machine hours | 1,000 | 350 | 650 | |
| Direct materials per unit | $92 | $115 | Batch setups | $136,364 | Setups | 146 | 60 | 86 | |
| Direct labor per unit | $51 | $75 | Quality control | $163,020 | Number of inspections | 1650 | 975 | 675 | |
| Technical support | $106,522 | Number of support calls | 964 | 352 | 612 | ||||
| Estimated annual production | 4000 units | 9000 units | Total manufacturing overhead cost | $484,746 | |||||
| Estimated total manufacturing overhead: | $ 484,746 | ||||||||
| Estimated total machine hours: | 1,000 | ||||||||
| Calculate the predetermined overhead rate using traditional | |||||||||
| volume-based costing | |||||||||
| Calculate the total amount of overhead that would be assigned to each product line | |||||||||
| using traditional volume-based costing | |||||||||
| EXPLORER | |||||||||
| CLIMBER | |||||||||
| Calculate the gross margin per unit for each product line using traditional volume-based costing | |||||||||
| EXPLORER | |||||||||
| CLIMBER | |||||||||
| Calculate the activity rate for each cost pool using activity-based costing | |||||||||
| ACTIVITY | RATE | ||||||||
| Machine maintenance | |||||||||
| Batch setups | |||||||||
| Quality control | |||||||||
| Labor support | |||||||||
| Calculate the total amount of overhead that would be assigned to each product line | |||||||||
| using activity-based costing | |||||||||
| EXPLORER | |||||||||
| CLIMBER | |||||||||
| Calculate the gross margin per unit for each product line using activity-based costing | |||||||||
| EXPLORER | |||||||||
| CLIMBER | |||||||||
Solutions
Expert Solution
| Req 1. | ||||||
| OH rate: | ||||||
| Estimated Overheads | 484,746 | |||||
| Divide: Estimated MH | 1,000 | |||||
| OH rate per MH | 484.75 | |||||
| Req 2. | ||||||
| OH assigned: | ||||||
| Explorer | ||||||
| Total MH useed | 350 | |||||
| OH rate | 484.75 | |||||
| OH applied | 169662.5 | |||||
| Climber | ||||||
| Total MH useed | 650 | |||||
| OH rate | 484.75 | |||||
| OH applied | 315087.5 | |||||
| Req 3. | ||||||
| Gross Profit: | ||||||
| Explorer | Climber | |||||
| Sales units | 4,000 | 9000 | ||||
| Selling price | 390 | 615 | ||||
| Sales revenue | 1560000 | 5535000 | ||||
| Less: Cost | ||||||
| Material | 368000 | 1035000 | ||||
| Labour | 204000 | 675000 | ||||
| Overheads | 169663 | 315087 | ||||
| Total cost | 741663 | 2025087 | ||||
| Gross profits | 818337 | 3509913 | ||||
| Req 4. | ||||||
| Activity rate: | ||||||
| STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL | ||||||
| Activity | Total | Expected | Activity | |||
| ACTIVITY COST POOL | Measures | Overheads | Activity | Rate | ||
| Machine Maintenance | MH | 78,840 | 1,000 | 78.84 | ||
| Batch setups | Setups | 136,364 | 146 | 934.00 | ||
| Quality c ontrol | Inspections | 163,020 | 1,650 | 98.80 | ||
| Technical support | Support calls | 106,522 | 964 | 110.50 | ||
| Req 5. | ||||||
| Overheads allocated: | ||||||
| Explorer | Climber | |||||
| Activity | Rate | Activity | OH | Activity | OH | |
| Machine Maintenance | 78.84 | 350 | 27594 | 650 | 51246 | |
| Batch setups | 934 | 60 | 56040 | 86 | 80324 | |
| Quality c ontrol | 98.8 | 975 | 96330 | 675 | 66690 | |
| Technical support | 110.5 | 352 | 38896 | 612 | 67626 | |
| Total Overheads | 218860 | 265886 | ||||
| req 6. | ||||||
| Gross profit | ||||||
| Gross Profit: | ||||||
| Explorer | Climber | |||||
| Sales units | 4,000 | 9000 | ||||
| Selling price | 390 | 615 | ||||
| Sales revenue | 1560000 | 5535000 | ||||
| Less: Cost | ||||||
| Material | 368000 | 1035000 | ||||
| Labour | 204000 | 675000 | ||||
| Overheads | 218860 | 265886 | ||||
| Total cost | 790860 | 1975886 | ||||
| Gross profits | 769140 | 3559114 | ||||
ekkarill92 answered 1 year agoRelated Solutions
Valley View Trailmasters makes two types of tents for mountain camping, the Explorer and the Climber....
Valley View Trailmasters makes two types of tents for
mountain camping, the Explorer and the Climber. Data concerning the
two product lines is presented in the table below:
EXPLORER
CLIMBER
Sales price per unit
$390
$615
Direct materials per unit
$92
$115
Direct labor per unit
$51
$75
Estimated annual production
4,000 units
9,000 units
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