Part 3: Activity-Based Costing Similarly, Mr. Suncat has a couple of questions for you regarding the activity-based costing method. He has provided the following additional information: Cost Pools Initial customer meeting Purchasing ingredients Making and baking the wedding cakes Decorating the wedding cakes Cost Drivers Number of hours $15,000 Estimated Overhead spent with customer Number of purchase requisitions Direct Labor hours. Direct Labor hours. Number of Final customer meeting and cake wedding cakes delivery $15,000 $40,000 $70,000 $10,000 Expected Use of Cost Drivers 4.5 hours 1000 150 requisitions requisitions 5.5 hours 9.5 hours Expected Use of Cost Driver: Basic Wedding Cake 0.75 hour 4200 1.25 hour 1.75 hours Expected Use of Cost Driver Multi-Layer Wedding Cake 1.25 hours 300 requisitions 2 hours 3 hours Expected Use of Cost Driver Custom Wedding Cake 2.5 hours 550 requisitions 4.75 hours 1500 cakes 1700 cakes 1000 cakes 2.25 hours a. Explain the difference between a job-order costing system and an activity-based costing system. b. Identify two reasons why an activity-based costing system may be appropriate for the Suncat Cake Shop. c. Above, you will see Mr. Suncat's cost pools and cost drivers for Suncat Cake Shop. Do you agree with them? Why or why not? If why not, what changes would you recommend? d. Using the information above, compute the activity-based overhead rate for each of the five cost pools. Round your answer to the nearest cent. Show all calculations and clearly label your answer. e. Using activity-based costing, compute the total manufacturing overhead cost that is expected to be allocated to each product. Show all calculations and clearly label your answer. 1. Basic Wedding Cake 2. Multi-layer Wedding Cake 3. Custom Wedding Cake f. Using activity-based costing, compute the product cost for each product. Show all calculations and clearly label your answer. 1. Basic Wedding Cake 2. Multi-layer Wedding Cake 3. Custom Wedding Cake 8. Compare the total manufacturing overhead cost and the product cost for each product under both the job-order costing method and the activity-based costing method. Which costing method would you recommend to Mr. Suncat for Suncat Cake Shop and why?

Part 3: Activity-Based Costing Similarly, Mr. Suncat has a couple of questions for you regarding the activity-based costing method. He has provided the following additional information: Cost Pools Initial customer meeting Purchasing ingredients Making and baking the wedding cakes Decorating the wedding cakes Cost Drivers Number of hours $15,000 Estimated Overhead spent with customer Number of purchase requisitions Direct Labor hours. Direct Labor hours. Number of Final customer meeting and cake wedding cakes delivery $15,000 $40,000 $70,000 $10,000 Expected Use of Cost Drivers 4.5 hours 1000 150 requisitions requisitions 5.5 hours 9.5 hours Expected Use of Cost Driver: Basic Wedding Cake 0.75 hour 4200 1.25 hour 1.75 hours Expected Use of Cost Driver Multi-Layer Wedding Cake 1.25 hours 300 requisitions 2 hours 3 hours Expected Use of Cost Driver Custom Wedding Cake 2.5 hours 550 requisitions 4.75 hours 1500 cakes 1700 cakes 1000 cakes 2.25 hours a. Explain the difference between a job-order costing system and an activity-based costing system. b. Identify two reasons why an activity-based costing system may be appropriate for the Suncat Cake Shop. c. Above, you will see Mr. Suncat's cost pools and cost drivers for Suncat Cake Shop. Do you agree with them? Why or why not? If why not, what changes would you recommend? d. Using the information above, compute the activity-based overhead rate for each of the five cost pools. Round your answer to the nearest cent. Show all calculations and clearly label your answer. e. Using activity-based costing, compute the total manufacturing overhead cost that is expected to be allocated to each product. Show all calculations and clearly label your answer. 1. Basic Wedding Cake 2. Multi-layer Wedding Cake 3. Custom Wedding Cake f. Using activity-based costing, compute the product cost for each product. Show all calculations and clearly label your answer. 1. Basic Wedding Cake 2. Multi-layer Wedding Cake 3. Custom Wedding Cake 8. Compare the total manufacturing overhead cost and the product cost for each product under both the job-order costing method and the activity-based costing method. Which costing method would you recommend to Mr. Suncat for Suncat Cake Shop and why?

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter4: Accounting For Factory Overhead

Section: Chapter Questions

Problem 4P: Using the data in P4-2 and Microsoft Excel: 1. Separate the variable and fixed elements. 2....

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