Activity-based costing, job-costing system. The Hewlett-Packard (HP) plant in Roseville, California, assembles and tests printed circuit (PC)

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Activity-based costing, job-costing system. The Hewlett-Packard (HP) plant in Roseville, California, assembles and tests printed circuit (PC) boards. The job-costing system at this plant has two direct-cost categories (direct materials and direct manufacturing labour) and CHAPTER 5 seven indirect-cost pools. These indirect-cost pools represent the seven activity areas that operating personnel at the plant determined were sufficiently different (in terms of cost behaviour patterns or in terms of individual products being assembled) to warrant separate cost pools. The cost-allocation base chosen for each activity area is the cost driver at that activity area.

Debbie Berlant, a newly appointed marketing manager at HP, attends a training session that describes how an activity-based costing approach has been used to design the Roseville plant’s job-costing system. Berlant is provided with the following incomplete information for a specific job (an order for a single PC board, No. A82):

Direct materials $90 Direct manufacturing labour 18 $108 Manufacturing overhead (see below) ?

Total manufacturing costs $ ?

Manufacturing Overhead Cost Pool Cost-Allocation Base Cost-Allocation Rate Units ofBase Used on Job No. A82 Manufacturing Overhead Allocated to Job 1. Axial insertion Axial insertions 0.096 45 ?

2. Dip insertion Dip insertions 0.30 ? 7.20 3. Manual insertion Manual insertions ? 11 6.60 4. Wave solder Boards soldered 4.20 ? 4.20 5. Backload Backload insertions p 6 5.04 6. Test Budgeted time board is in test activity 108.00 0.25 ?

7. Defect analysis Budgeted time for defect analysis and repair ? 0.10 9.60 Required 1. Present an overview exhibit ofthe activity-based job-costing system at the Roseville plant.

2. Fill in the blanks (signalled by a question mark) in the cost information provided to Berlant forJob No. A82.

3. Why might manufacturing managers and marketing managers favour this ABC job-costing system over the prior costing system, which had the same two direct-cost categories but only a single indirect-cost pool (manufacturing overhead allocated using direct labour cost)?

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Related Book For  book-img-for-question

Cost Accounting A Managerial Emphasis

ISBN: 9780131971905

4th Canadian Edition

Authors: Charles T. Horngren, George Foster, Srikant M. Datar, Howard D. Teall

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