Utica Manufacturing (UM) was recently acquired by MegaMachines, Inc. (MM), and organized as a separate division...

Transcribed Image Text:

Utica Manufacturing (UM) was recently acquired by MegaMachines, Inc. (MM), and organized as a separate division within the company. Most manufacturing plants at MM use an ABC system, but UM has always used a traditional product costing system. Bob Miller, the plant controller at UM, has decided to experiment with ABC and has asked you to help develop a simple ABC system that would help him decide if it was useful. The controller's staff has identified costs for the first month in the four overhead cost pools along with appropriate cost drivers for each pool. Cost Pools Incoming inspection Production Machine setup Shipping Costs 158,000 1,500,000 700,000 270,000 Activity Drivers Direct material cost Machine-hours Setups Units shipped The company manufactures two basic products with model numbers 308 and 510. The following are data for production for the first month as part of MM. Products 308 Total direct material costs Total direct labor costs Total machine-hours $ 51,000 $169,000 510 $ 28,000 $199,000 50,000 100,000 Total number of setups 50 90 Total pounds of material 17,100 8,100 Total direct labor-hours 5,100 8,100 Number of units produced and shipped 20,000 10,000 Required A Required B Required C Required D 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.) Total cost Per unit cost 308 510 A consulting firm has Required B ..nded 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 Production Machine setup Shipping % of material dollars per machine-hour per setup 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 cost pools is used? (Round intermediate calculations and final answers to 2 decimal places.) Total cost Per unit cost 308 510 If management should decide to implement an activity-based costing system, what benefits should it expect? If management implemented an activity-based costing system it should be provided with a more thorough understanding of product costs. If management implemented an activity-based costing system it will increase the sales of the company. Utica Manufacturing (UM) was recently acquired by MegaMachines, Inc. (MM), and organized as a separate division within the company. Most manufacturing plants at MM use an ABC system, but UM has always used a traditional product costing system. Bob Miller, the plant controller at UM, has decided to experiment with ABC and has asked you to help develop a simple ABC system that would help him decide if it was useful. The controller's staff has identified costs for the first month in the four overhead cost pools along with appropriate cost drivers for each pool. Cost Pools Incoming inspection Production Machine setup Shipping Costs 158,000 1,500,000 700,000 270,000 Activity Drivers Direct material cost Machine-hours Setups Units shipped The company manufactures two basic products with model numbers 308 and 510. The following are data for production for the first month as part of MM. Products 308 Total direct material costs Total direct labor costs Total machine-hours $ 51,000 $169,000 510 $ 28,000 $199,000 50,000 100,000 Total number of setups 50 90 Total pounds of material 17,100 8,100 Total direct labor-hours 5,100 8,100 Number of units produced and shipped 20,000 10,000 Required A Required B Required C Required D 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.) Total cost Per unit cost 308 510 A consulting firm has Required B ..nded 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 Production Machine setup Shipping % of material dollars per machine-hour per setup 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 cost pools is used? (Round intermediate calculations and final answers to 2 decimal places.) Total cost Per unit cost 308 510 If management should decide to implement an activity-based costing system, what benefits should it expect? If management implemented an activity-based costing system it should be provided with a more thorough understanding of product costs. If management implemented an activity-based costing system it will increase the sales of the company.