E5-28)Hakara Company has been using direct labor costs as the basis for assigning overhead to itsmany products. Under this allocation system, product A has been assigned overhead of $10.80per unit, while product B has been assigned $3.60 per unit. Management feels that an ABCsystem will provide a more accurate allocation of the overhead costs and has collected thefollowing cost pool and cost driver information:Cost PoolsMachine setupMaterials handlingElectric power20Activity Costs Cost Drivers$360,000100,00040,000Number of units producedDirect materials costDirect labor costNumber of setup hoursPounds of materials usedKilowatt-hoursSetup hoursPounds of materialsKilowatt-hoursproducts:The following cost information pertains to the production of A and B, just two of Hakara's manyA4,000$ 42,000$ 24,0004001,0002,000B20,000$ 54,000$ 40,0002003,0004,000Activity DriverConsumptionRequired:1. Use activity-based costing to determine a unit cost for each product4,00020,00040,000

Activity Rate:— It is the rate used to allocate manufacturing overhead cost to cost object under…

E5-28) Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $10.80 per unit, while product B has been assigned $3.60 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information: Cost Pools Machine setup Materials handling Electric power Activity Costs $360,000 100,000 40,000 Cost Drivers Setup hours Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours Pounds of materials Kilowatt-hours The following cost information pertains to the production of A and B, just two of Hakara's many products: A 4,000 $ 42,000 $ 24,000 400 1,000 2,000 B 20,000 $ 54,000 $ 40,000 200 3,000 4,000 Activity Driver Consumption Required: 1. Use activity-based costing to determine a unit cost for each product 4,000 20,000 40,000

E5-28) Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $10.80 per unit, while product B has been assigned $3.60 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information: Cost Pools Machine setup Materials handling Electric power Activity Costs $360,000 100,000 40,000 Cost Drivers Setup hours Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours Pounds of materials Kilowatt-hours The following cost information pertains to the production of A and B, just two of Hakara's many products: A 4,000 $ 42,000 $ 24,000 400 1,000 2,000 B 20,000 $ 54,000 $ 40,000 200 3,000 4,000 Activity Driver Consumption Required: 1. Use activity-based costing to determine a unit cost for each product 4,000 20,000 40,000

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 35P: The management of Wheeler Company has decided to develop cost formulas for its major overhead...

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Carltons Kitchens three cost pools and overhead estimates are as follows: Compare the overhead allocation using: A. The traditional allocation method B. The activity-based costing method (Hint: the traditional method uses machine hours as the allocation base.)
The management of Wheeler Company has decided to develop cost formulas for its major overhead activities. Wheeler uses a highly automated manufacturing process, and power costs are a significant manufacturing cost. Cost analysts have decided that power costs are mixed; thus, they must be broken into their fixed and variable elements so that the cost behavior of the power usage activity can be properly described. Machine hours have been selected as the activity driver for power costs. The following data for the past eight quarters have been collected: Required: 1. Prepare a scattergraph by plotting power costs against machine hours. Does the scatter-graph show a linear relationship between machine hours and power cost? 2. Using the high and low points, compute a power cost formula. 3. Use the method of least squares to compute a power cost formula. Evaluate the coefficient of determination. 4. Rerun the regression and drop the point (20,000; 26,000) as an outlier. Compare the results from this regression to those for the regression in Requirement 3. Which is better?
Frenchys has three cost pools and an associated cost driver to allocate the costs to the product. The cost pools, cost driver, estimated overhead, and estimated activity for the cost pool are: What is the predetermined overhead rate for each activity?
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Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $26.87 per unit, while product B has been assigned $7.62 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information: Cost Pools Activity Costs $ 415,000 120,000 44,000 The following cost information pertains to the production of A and B, just two of Hakara's many products: Machine setup Materials handling Electric power Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours Product A Product B A 5,000 $ 22,000 $ 39,000 Cost per Unit Cost Drivers Setup hours Pounds of materials Kilowatt-hours 200 2,000 4,000 B 20,000 $ 26,000 $ 37,000 Activity Driver Consumption 5,000 15,000 22,000 200 2,000 4,000 Required: 1. Use…
Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $24.82 per unit, while product B has been assigned $13.58 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information: Cost Pools Activity Costs Cost Drivers Activity Driver Consumption Machine setup $ 158,000 Setup hours 2,000 Materials handling 112,000 Pounds of materials 16,000 Electric power 25,000 Kilowatt-hours 25,000 The following cost information pertains to the production of A and B, just two of Hakara's many products: A B Number of units produced 5,000 10,000 Direct materials cost $ 32,000 $ 41,000 Direct labor cost $ 41,000 $ 38,000 Number of setup hours 100 200 Pounds of materials used 1,000 1,000 Kilowatt-hours 2,000 4,000 Required: 1. Use…
Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $31.58 per unit, while product B has been assigned $8.69 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information: Activity Costs $ 198,000 Activity Driver Consumption 2,000 21,000 168,000 40,000 40,000 The following cost information pertains to the production of A and B, just two of Hakara's many products: Cost Pools Machine setup Materials handling Electric power Number of units produced Direct materials cost Direct labor cost. Number of setup hours Pounds of materials used Kilowatt-hours Product A Product B A 4,000 $ 31,000 $ 33,000 Cost per Unit 200 1,000 4,000 Cost Drivers Setup hours Pounds of materials Kilowatt-hours Required: 1. Use activity-based costing to determine a unit cost for…
Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $35.29 per unit, while product B has been assigned $8.25 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information: Cost Pools Activity Costs Cost Drivers Activity Driver Consumption Machine setup $ 261,000 Setup hours 3,000 Materials handling 153,000 Pounds of materials 17,000 Electric power 38,000 Kilowatt-hours 38,000 The following cost information pertains to the production of A and B, just two of Hakara's many products: A B Number of units produced 4,000 20,000 Direct materials cost $ 37,000 $ 27,000 Direct labor cost $ 41,000 $ 40,000 Number of setup hours 200 200 Pounds of materials used 1,000…
The current cost accounting system charges overhead to products based on machine-hours. What unit product costs will be reported for the two products if the current cost system continues to be used? (Round intermediate calculations and "Per unit cost" answers to 2 decimal places.) 308 510 Total cost Per unit cost A consulting firm has recommended using an activity-based costing system, with the activities based on the cost pools identified by the cost accountant. What are the cost driver rates for the four cost pools identified by the cost accountant? (Round your answers to 2 decimal places.) Incoming inspection % of material dollars Production per machine-hour Machine setup per setup Shipping per unit What unit product costs will be reported for the two products if the ABC system suggested by the cost accountant’s classification of…
Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts-equipment depreciation and supervisory expense-to three activity cost pools-Machining. Order Filing, and Other-based on resource consumption, Data to perform these allocations appear below: Overhead costs: Equipment depreciation Supervisory expense $ 30,000 $ 14,800 Distribution of Resource Consumption Across Activity Cost Pools: Equipment depreciation Supervisory expense Activity: Product W1 Product Me Total Machining Order Filling 0.50 0.50 In the second stage, Machining costs are assigned to products using machine-hours (Ms) and Order Filing costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Product W1 Product Me Total Activity Cost Pools MHS (Machining) 5,530 17,000 22,530 0.40 0.30 Show Transcribed Text 5,530 17,000 22,530 Orders (Order Filling)…
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Eisenhower Services, Inc., a management consulting firm, has been using a single predetermined overhead allocation rate with direct labor hours as the allocation pase to allocate overhead costs. The president of Eisenhower decided to develop an ABC system to more accurately allocate the indirect costs. She identified two activities related to the total indirect costs-travel and information technology (IT) support. The other relevant details are given below: Estimated quantity of allocation base Activity Allocation base Estimated costs 1,800 miles 7,400 DLH. Travel $10,000 72,000 $82,000 Miles driven IT Support Direct labor hours Total During the current month, Eisenhower's consultants spent 240 labor hours for Miller, Inc. The job required the professionals to travel 360 miles in total. Direct Labor i billed at $55 per hour. Determine the total cost of the consulting job using the ABC system. (Round any intermediate calculations to the nearest cent and your final answer to thé nearest…