Wolfgang Iser, the accountant of Starkuchen, wants to further examine the relative profitability of raisin cake and
Question:
Wolfgang Iser, the accountant of Starkuchen, wants to further examine the relative profitability of raisin cake and layered carrot cake. He questions the accuracy of the activity-based normal costing numbers. He notes that the 2021 actual manufacturing indirect cost was €256 256. This differs sizably from the €210 800 budgeted amount. The 2021 actual indirect costs per activity area were as follows:
Required 1 Calculate the under- or overallocated manufacturing indirect costs in 2021 for:
a Each of the five activity area indirect-cost pools.
b The aggregate of individual activity area indirect costs.
2 Assume that Starkuchen allocates under- or overallocated indirect costs to individual accounts based on the allocated overhead component in that account. What are the pros and cons of using:
a Five separate under- or overallocated adjustments (one for each activity area)?
b One under- or overallocated adjustment for the aggregate of all activity area indirect costs?
3 Calculate the 2021 actual unit product cost for raisin cake and layered carrot cake using the information calculated in requirement 1a.
4 Comment on the implications of the product-cost numbers in requirement 3 for Starkuchen’s pricing decisions in 2022.
Step by Step Answer:
Management And Cost Accounting
ISBN: 9781292436029
8th Edition
Authors: Alnoor Bhimani, Srikant Datar, Charles Horngren, Madhav Rajan