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Chapter 19: Q33PGA_3 (page 1076)

Willitte Pharmaceuticals manufactures an over-the-counter allergy medication. The company sells both large commercial containers of 1,000 capsules to health care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels. The following information has been developed to determine if an activity-based costing system would be beneficial:

Activity Estimated Estimated Quantity

Indirect Cost Allocation Base of Allocation Base

Materials handling \( 95,000 Number of kilos 19,000 kilos

Packaging 200,000 Number of machine hours 5,000 hours

Quality assurance 112,500 Number of samples 1,875 samples

Total indirect costs \) 407,500

Actual production information includes the following:

Commercial Containers Travel Packs

Units produced 2,400 containers 50,000 packs

Weight in kilos 9,600 5,000

Machine hours 1,680 500

Number of samples 240 750

Requirements

3. Use the predetermined overhead allocation rates to compute the activity-based costs per unit of the commercial containers and the travel packs. Round to two decimal places. (Hint: First compute the total activity-based costs allocated to each product line, and then compute the cost per unit.)

Short Answer

Expert verified

Activity-based cost per unit

For Commercial Containers:$54

For Travel Packs:$1.8

Step by step solution

01

Computation for Commercial containers

02

Computation for Travel Packs

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Most popular questions from this chapter

What is the purpose of quality management systems?

Eason Company manufactures wheel rims. The controller expects the following ABC allocation rates for 2018:

Activity Allocation Base Predetermined Overhead

Allocation Rate

Materials handling Number of parts $ 4.00 per part

Machine setup Number of setups 400.00 per setup

Insertion of parts Number of parts 26.00 per part

Finishing Number of finishing hours 90.00 per hour

Eason produces two wheel rim models: standard and deluxe. Expected data for 2018 are as follows:

Standard Deluxe

Parts per rim 4.0 7.0

Setups per 500 rims 18.0 18.0

Finishing hours per rim 1.0 5.5

Total direct hours per rim 5.0 6.0

The company expects to produce 500 units of each model during the year.

Requirements

2. Prior to 2018, Eason used a single plantwide overhead allocation rate system with direct labor hours as the allocation base. Compute the predetermined overhead allocation rate based on direct labor hours for 2018. Use this rate to determine the estimated indirect manufacturing cost per wheel rim for each model, to the nearest cent.

Question:Gateway produces electronic calculators. Suppose Gateway鈥檚 standard cost per calculator is \(25 for direct materials and \)68 for conversion costs. The following data applyto August activities:

Direct materials purchased (on account) \( 8,300

Conversion costs incurred 20,500

Number of calculators produced 300 calculators

Number of calculators sold (on account, at \)105 each) 295 calculators

Requirements

1. Prepare summary journal entries for August using JIT costing, including the entryto adjust the Conversion Costs account.

2. The beginning balance of Finished Goods Inventory was $1,300. Use a T-accountto find the ending balance of Finished Goods Inventory.

PetSmart, Inc. is a large specialty pet retailer of services and solutions for the needs of pets. In addition to selling pet food and pet products, PetSmart also offers dog grooming services including bath, nail trim, teeth brushing, aromatherapy to reduce everyday stress, and nail polish and stickers. PetSmart even offers a Top Dog service that includes a premium shampoo, milk bath conditioner, scented cologne spritz, teeth brushing, and bandana or bow.

Assume PetSmart, Inc. expects to incur \(380,000 of indirect costs this year. The company allocates indirect costs based on the following activities:

___________________________________________________________________

Activity Estimated Allocation Base Estimated Quantity

Cost of Allocation

Base____

Admission \) 60,000 Number of admissions 20,000

Cleaning 240,000 Cleaning direct labor hours 100,000

Grooming 80,000 Grooming direct labor hours 4,000

Total indirect costs $ 380,000________________________________________

Requirements

1. Calculate the predetermined overhead allocation rate for each activity.

Question:Newton Company has analyzed its production process and identified two primary activities. These activities, their allocation bases, and their estimated costs are listed below.

Activity

Allocation Base

Estimated Activity

Estimated Costs

Purchasing

Number of purchase orders

200 purchase orders

\( 10,000

Materials Handling

Number of parts

15,000 parts

\) 7,500

The company manufactures two products: Regular and Super. The products use the following resources in March:

Regular Super

Number of purchase orders 5 purchase orders 7 purchase orders

Number of parts 600 parts 750 parts

5. Compute the predetermined overhead allocation rates using activity-based costing.

6. Determine the amount of overhead allocated to Regular products in March.

7. Determine the amount of overhead allocated to Super products in March.
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