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Chapter 19: Q. 19-7SE (page 1065)

Jaunkas Corp. manufactures mid-fi and hi-fi stereo receivers. The following data have been summarized:

Mid-Fi Hi-Fi

Direct materials cost per unit \( 400 \) 1,800

Direct labor cost per unit 600 400

Indirect manufacturing cost per unit ? ?

Indirect manufacturing cost information includes the following:

Activity

Predetermined

Overhead

Allocation Rate

Mid-Fi

Hi-Fi

Setup

\( 1,400 per setup

36 setups

36 setups

Inspection

\) 700 per inspection hour

35 inspection hours

20 inspection hours

Machine maintenance

$ 13 per machine hour

1,900 machine hours

1,150 machine hours

The company plans to manufacture 125 units of the mid-fi receivers and 250 units of the hi-fi receivers. Calculate the product cost per unit for both products using activity-based costing.

Short Answer

Expert verified

Per unit indirect cost

For Mid-Fi: $796.8

For Hi-Fi:$317.4

Step by step solution

01

Per unit product cost for Mid-Fi

setupcost=predeterminedoverheadallocationrate脳No.ofsetups=$1,400脳36=$50,400

Inspectioncost=predeterminedoverheadallocationrate脳No.ofinspectionhour=$700脳35=$24,500

machinemaintenancecost=predeterminedoverheadallocationrate脳No.ofmachinehour=$13脳1,900=$24,700

role="math" localid="1651119026428" totalindirectcost=setupcost+inspectioncost+machinemaintenancecost=$50,400+$24,500+$24,700=$99,600

Perunitindirectcost=totalindirectcostnumberofproductsmanufactured=$99,600125=$796.8

02

Per unit product cost for Hi-Fi

setupcost=predeterminedoverheadallocationrate脳No.ofsetups=$1,400脳36=$50,400

Inspectioncost=predeterminedoverheadallocationrate脳No.ofinspectionhour=$700脳20=$14,000

machinemaintenancecost=predeterminedoverheadallocationrate脳No.ofmachinehour=$13脳1,150=$14,950

totalindirectcost=setupcost+inspectioncost+machinemaintenancecost=$50,400+$14,000+$14,950=$79,350

Perunitindirectcost=totalindirectcostnumberofproductsmanufactured=$79,350125=$317.4

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Most popular questions from this chapter

Refer to Exercises E19-20 and E19-21. Controller Michael Bender is surprised by the increase in cost of the deluxe model under ABC. Market research shows that for the deluxe rim to provide a reasonable profit, Eason will have to meet a target manufacturing cost of \(625.00 per rim. A value engineering study by Eason鈥檚 employees suggests that modifications to the finishing process could cut finishing cost from \)90.00 to \(60.00 per hour and reduce the finishing direct labor hours per deluxe rim from 5.50 hours to 5.0 hours. Direct materials would remain unchanged at \)48.00 per rim, as would direct labor at $52.00 per rim. The materials handling, machine setup, and insertion of parts activity costs also would remain the same.

Would implementing the value engineering recommendation enable Eason to achieve its target cost for the deluxe rim?

Koehler makes handheld calculators in two models: basic and professional. Koehler estimated $721,000 of manufacturing overhead and 515,000 machine hours for the year. The basic model actually consumed 230,000 machine hours, and the professional model consumed 285,000 machine hours.

Compute the predetermined overhead allocation rate using machine hours (MHr) as the allocation base. How much overhead is allocated to the basic model? To the professional model?

Turbo Champs Corp. uses activity-based costing to account for its motorcycle manufacturing process. Company managers have identified three supporting manufacturing activities: inspection, machine setup, and machine maintenance. The budgeted activity costs for 2018 and their allocation bases are as follows:

Activity Total Budgeted Cost Allocation Base

Inspections \( 5,700 Number of inspections

Machine setup 22,000 Number of setups

Machine maintenance 6,000 Finishing of machine hours

Total \) 33,700

Turbo Champs expects to produce 20 custom-built motorcycles for the year. The motorcycles are expected to require 100 inspections, 40 setups, and 100 machine hours.

Requirements

2. Compute the expected indirect manufacturing cost of each motorcycle.

Bubba and Danny are college friends planning a skiing trip to Killington before the new year. They estimated the following for the trip:

Estimated Activity Allocation

Costs Allocation Base Bubba Danny

Food \( 400 Pounds of food eaten 24 26

Skiing 300 Number of lift tickets 2 0

Lodging 280 Number of nights 2 2

\) 980

Requirements

2. Danny does not like the idea of sharing the costs equally because he plans to stay in the room rather than ski. Danny suggests that each type of cost be allocated to each person based on the above-listed allocation bases. Using the activity allocation for each person, calculate the amount that each person would pay based on his own consumption of the activity.

Question:Oscar, Inc. manufactures bookcases and uses an activity-based costing system. Oscar鈥檚 activity areas and related data follow:

Activity

Budgeted Cost of Activity

Allocation Base

Predetermined Overhead Allocation Rate

Materials handling

\( 240,000

Number of parts

\)1.00

Assembly

3,500,000

Number of assembling direct labor hours

17.00

Finishing

190,000

Number of finished units*

4.50

*Refers to number of units receiving the finishing activity, not the number of units transferred to Finished Goods Inventory

Oscar produced two styles of bookcases in October: the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing. The totals for quantities, direct materials costs, and other data follow:

Product

Total Units Produced

Total Direct materials Costs

Total Direct Labor Costs

Total Number of Parts

Total Assembling Direct Labor Hours

Standard bookcase

7,000

\(91,000

\)105,000

28,000

10,500

Unfinished bookcase

7,500

82,500

75,000

22,500

7,500

Requirements

4. What price should Oscar鈥檚 managers set for unfinished bookcases to earn a net profit of $19 per bookcase?
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