Crenshaw Inc. is considering a change to activity-based product costing. The company produces two products, cell...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Crenshaw Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in a single production department. The production department is estimated to require 2,000 direct labor hours. The total indirect labor for the department is budgeted to be $480,000. Time records from indirect labor employees revealed that they spent 30% of their time setting up production runs and 70% of their time supporting actual production. The following information about cell phones and tablet PCs was determined from the corporate records: Cell phones Tablet PCs Total Number of Setups Direct Labor Hours Units 1,200 1,000 80,000 2,800 4,000 1,000 80,000 2,000 160,000 If required, round all per unit answers to the nearest cent. a. Determine the indirect labor cost per unit allocated to cell phones and tablet PCs under a single plantwide factory overhead rate system using the direct labor hours as the allocation base. Cell phones $ per unit Tablet PCs per unit b. Determine the budgeted activity costs and activity rates for the indirect labor under activity-based costing. Assume two activities-one for setup and the other for production support. Budgeted Activity Cost Setup Production support Cell phones $ Tablet PCs Activity Rate per setup per direct labor hour Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing. per unit per unit d. Why are the per-unit allocated costs in (a) different from the per-unit activity cost assigned to the products in (c)? The per-unit indirect labor costs in (a) are distorted because setup activity single-rate system is consumed by the products in a different ratio from the direct labor. The activity-based allocates overhead only on the basis of direct labor hours. Since the direct labor hours are equal for each product, the allocated indirect labor will also be costing method properly allocates the setup-related activity so that the tablets PCs equal. receive a larger portion of the setup activity cost. The Crenshaw Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in a single production department. The production department is estimated to require 2,000 direct labor hours. The total indirect labor for the department is budgeted to be $480,000. Time records from indirect labor employees revealed that they spent 30% of their time setting up production runs and 70% of their time supporting actual production. The following information about cell phones and tablet PCs was determined from the corporate records: Cell phones Tablet PCs Total Number of Setups Direct Labor Hours Units 1,200 1,000 80,000 2,800 4,000 1,000 80,000 2,000 160,000 If required, round all per unit answers to the nearest cent. a. Determine the indirect labor cost per unit allocated to cell phones and tablet PCs under a single plantwide factory overhead rate system using the direct labor hours as the allocation base. Cell phones $ per unit Tablet PCs per unit b. Determine the budgeted activity costs and activity rates for the indirect labor under activity-based costing. Assume two activities-one for setup and the other for production support. Budgeted Activity Cost Setup Production support Cell phones $ Tablet PCs Activity Rate per setup per direct labor hour Determine the activity cost per unit for indirect labor allocated to each product under activity-based costing. per unit per unit d. Why are the per-unit allocated costs in (a) different from the per-unit activity cost assigned to the products in (c)? The per-unit indirect labor costs in (a) are distorted because setup activity single-rate system is consumed by the products in a different ratio from the direct labor. The activity-based allocates overhead only on the basis of direct labor hours. Since the direct labor hours are equal for each product, the allocated indirect labor will also be costing method properly allocates the setup-related activity so that the tablets PCs equal. receive a larger portion of the setup activity cost. The
Expert Answer:
Related Book For
Financial and Managerial Accounting
ISBN: 978-1285078571
12th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
Posted Date:
Students also viewed these accounting questions
-
Advanced Products Corporation has supplied the following data from its activity-based costing system: During the year, Advanced Products completed one order for a new customer, Shenzhen Enterprises....
-
What is the common name for the following structure? CH3 CH3 -C-Br 1 CH3 Isobutyl bromide Osec-Butyl bromide O Neobutyl bromide O Isopropyl methyl bromide t-Butyl bromide
-
Now use the moment generating function from Exercise 43.1 to verify that, if X is Geometric with parameter p, then E(X2) = (2 - p)/p2. In Exercise 1 P(X = x) = px(x) = (1- p)x-lp For x = 1, 2, 3,...,...
-
Basic but detailed Information about the firm under consideration, including its historical evolution, areas of activity, i.e., type of goods/service it provides, geographical operations, management...
-
What happens to hours of work when the wage rate falls? Decompose the change in hours of work into income and substitution effects.
-
Jim Duggan made an investment of $10,000 in a savings account 10 years ago. This account paid interest of 51/2% for the first 4 years and 61/2% interest for the remaining 6 years. The interest...
-
comments about these post? 1. The bullwhip effect is a word used to explain a situation in supply chain management where minor consumer demand changes can cause intense fluctuations in demand...
-
1. The Ijsselmeer (Ijssel-lake) is an in-land bay in Europe and was recovered from the sea by building a 32 km long dyke between the sea and the now sweet water lake. Initially, the water in the...
-
What amount of money invested today at 2.49% compounded semiannually will have an accumulated value of $809,500 in 7 years from now. P/Y = PV = $ C/Y = PMT= $ N= FV = $ I/Y = %
-
For calendar year 2022, Stuart and Pamela Gibson file a joint return reflecting AGI of $372,000. Their itemized deductions are as follows: Note: All expenses are before any applicable limitations,...
-
1. What year are you preparing your students for? 1973? 1995? Provide evidence that your school's curriculum and the program you use are preparing your students for 2030? Are you even preparing them...
-
Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or...
-
1. Compute the lower of cost or market for the Inventory applied separately to each item. 2. If the market amount is less than the recorded cost of the inventory, then record the LCM adjustment to...
-
Who took specific actions that resulted in the present situation and what actions did them each take? Read the case study the empowerment Effort and answer the above question
-
Below is a sample of the data in the file NFLAttendance which contains the 32 teams in the National Football League, their conference affiliation, their division, and their average home attendance....
-
Colors of fabrics at a clothing store. Determine whether the data are qualitative or quantitative. Explain your reasoning.
-
Weights of bricks at a construction site. Determine whether the data are qualitative or quantitative. Explain your reasoning.
-
Marital statuses mentioned in an employment form. Determine whether the data are qualitative or quantitative. Explain your reasoning.
Study smarter with the SolutionInn App