You are a manager at PopUp Company, who manufactures toaster ovens. Your company produces two types...

You are a manager at PopUp Company, who manufactures toaster ovens. Your company produces two types of toaster ovens: basic and deluxe. PopUp Company currently uses a traditional unit-based costing system, however, you feel strongly the company should switch to an activity-based costing system. You believe this change would provide you more accurate costing information, which would allow for better strategic decision making.

Required:

1.Compare the traditional and activity-based cost management systems. Give advantages and disadvantages of each and discuss how these concepts will relate to PopUp Company.

2.


PopUp Company produces two types of toasters, basic and deluxe. For the current period, the company reports the following data:

	Basic Toaster	Deluxe Toaster
Volume	20,000 units	5,000 units
Machine Hours	1,000	2,400
Batches	315	125
Engineering Modifications	20	50
Prime Costs	$20,000	$30,000
Market Price	$25 per unit	$60 per unit

Additional Information Follows

	Costs	Driver
Engineering Support	$15,900	Modifications
Electricity	25,000	Machine Hours
Setup costs	33,900	Batches


1) Compute the manufacturing cost per unit of each toaster using the current unit-based approach.
Under this system costs are assigned to the toasters on the basis of machine hours.

2) Compute the manufacturing cost per unit of each toaster using an activy-based costing approach

Expert Solution

1	Total manufacturing overheads	74800
	Total machine hours	3400
	Predetermined overhead rate	22
		Basic toaster	Deluxe toaster
	Predetermined overhead rate	22	22
	Mahine hours	1000	2400
	Manufacturing overheads	22000	52800
	Number of units	20000	5000
	Manufacturing overhead per unit	1.1	10.56

2		Budgted amount	Activity base	Amount per activity
	Engineering support	15900	70	227.14
	Electricity	25000	3400	7.35
	Setups costs	33900	440	77.05
	Total	74800
		Basic toaster	Per unit	Total cost
	Engineering support	20	227.14	4543
	Electricity	1000	7.35	7353
	Setups costs	315	77.05	24269
	Total cost			36165
	Number of units			20000
	Manufacturing overhead per unit			1.81

		Deluxe	Per unit	Total cost
	Engineering support	50	227.14	11357
	Electricity	2400	7.35	17647
	Setups costs	125	77.05	9631
	Total cost			38635
	Number of units			5000
	Manufacturing overhead per unit			7.73

ekkarill92 answered 2 years ago

Contribution Margin Variance Iliff, Inc., produces and sells two types of countertop ovens—the toaster oven and...

Contribution Margin Variance Iliff, Inc., produces and sells two types of countertop ovens—the toaster oven and the convection oven. Budgeted and actual data for the two models are shown below. Budgeted Amounts: Toaster Oven Convection Oven Total Sales: ($90 × 26,500) $2,385,000 ($151 × 16,000) $2,416,000 $4,801,000 Variable expenses 470,000 670,000 1,140,000 Contribution margin $1,915,000 $1,746,000 $3,661,000 Actual Amounts: Toaster Oven Convection Oven Total Sales: ($83 × 25,500) $2,116,500 ($165 × 12,000) $1,980,000 $4,096,500 Variable expenses 535,200 739,000 1,274,200 Contribution...

Contribution Margin Volume Variance Iliff, Inc., produces and sells two types of countertop ovens—the toaster oven...

Contribution Margin Volume Variance Iliff, Inc., produces and sells two types of countertop ovens—the toaster oven and the convection oven. Budgeted and actual data for the two models are shown below. Budgeted Amounts: Toaster Oven Convection Oven Total Sales: ($100 × 29,500) $2,950,000 ($149 × 14,500) $2,160,500 $5,110,500 Variable expenses 460,000 800,000 1,260,000 Contribution margin $2,490,000 $1,360,500 $3,850,500 Actual Amounts: Toaster Oven Convection Oven Total Sales: ($82 × 25,000) $2,050,000 ($157 × 13,500) $2,119,500 $4,169,500 Variable expenses 570,400 658,900 1,229,300 ...

Healthier Living Company manufactures two products, toaster ovens and bread machines. The following data are available:...

Healthier Living Company manufactures two products, toaster ovens and bread machines. The following data are available: toaster ovens bread machines sales price $80 $150 variable costs $40 $100 Healthier Living can manufacture six toaster ovens per machine hour and four bread machines per machine hour. Healthier Living's production capacity is 1,800 machine hours per month. Marketing limitations indicate that Healthier Living can sell a maximum of 5,000 toasters a month, and 4,000 bread machines per month. Which product and how...

Table 6 Easy Cook Company manufactures two products: toaster ovens and bread machines. The following data...

Table 6 Easy Cook Company manufactures two products: toaster ovens and bread machines. The following data are available: Toaster Ovens Bread Machines Sale price $60 $135 Variable costs 38 62 The company can manufacture five toaster ovens per machine hour and three bread ovens per machine hour. The company’s production capacity is 1,500 machine hours per month. Refer to Table 6. To maximize profits, the company should produce ________.

PopUp Company produces two types of toasters, basic and deluxe. For the current period, the company...

PopUp Company produces two types of toasters, basic and deluxe. For the current period, the company reports the following data: Basic Toaster Deluxe Toaster Volume 20,000 units 5,000 units Machine Hours 1,000 2,400 Batches 315 125 Engineering Modifications 20 50 Prime Costs $20,000 $30,000 Market Price $25 per unit $60 per unit Additional Information Follows Costs Driver Engineering Support $15,900 Engineering Modifications Electricity 25,000 Machine Hours Setup costs 33,900 Batches 1) Compute the manufacturing cost per...

Delicioso Ltd manufactures two types of Microwave Ovens – Conventional and Integrated. The company is currently...

Delicioso Ltd manufactures two types of Microwave Ovens – Conventional and Integrated. The company is currently using a traditional costing system with machine hours as the cost driver. The company is considering whether to use the activity-based costing (ABC) method to allocate overhead costs to products. Budgeted overhead costs of the upcoming accounting period follow: Activity Total budgeted activity cost Activity driver Machining $300,000 Number of machine hours Setup $100,000 Number of production runs Inspection $105,000 Number of inspection hours...

The Magnetron Company manufactures and markets microwave ovens. Currently, the company produces two models: full-size and...

The Magnetron Company manufactures and markets microwave ovens. Currently, the company produces two models: full-size and compact. Production is limited by the amount of labor available in the general assembly and electronic assembly departments, as well as by the demand for each model. Each full-size oven requires 2 hours of general assembly and 2 hours of electronic assembly, whereas each compact oven requires 1 hour of general assembly and 3 hours of electronic assembly. In the current production period, there...

A company manufactures 10,000 microwave ovens every period. Each of the ovens requires a timer. The...

A company manufactures 10,000 microwave ovens every period. Each of the ovens requires a timer. The company currently manufactures the 10,000 timers with the following cost: direct materials $40,000, direct labor $50,000, variable overhead $20,000, fixed overhead $60,000 (the fixed overhead is only 50% avoidable if the company stops making timers). An external supplier offers the company to supply the timers for $15 each. What will be the effect on the company's profit if it decides to buy the timers...

You are the manager of a company that makes two types of toilet rolls with the...

You are the manager of a company that makes two types of toilet rolls with the following information: Super Regular Unit price $2.00 $1.00 Unit variable cost $1.40 0.025 Unit volume 1,000,000 units made/year 1,500,000 unit made/year It is recommended that you either reduce the price of Super by 10% or invest additional $150,000 in adverting Super. Or reduce the price of Regular by 20%, or invest additional $100,00 in advertising Regular. a) What is your contribution (in dollars) on...

You are the marketing manager for TotalControl, an electronics company in Orangeburg. Your company produces a...

You are the marketing manager for TotalControl, an electronics company in Orangeburg. Your company produces a line of remote controls for use in home theaters. The company’s main product, the UR 1000, sold 5000 remotes via internet sales this year. Sales of the product are expected to grow to 6000 next year. The UR 1000 remote sells for $89 each. The company is considering expanding its product line by introducing a new remote with touchscreen controls, the UR 9000T. This...

Question