Question
A.) Zumbrunnen Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools-Processing, Supervising, and
A.)
Zumbrunnen Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools-Processing, Supervising, and Other. The costs in those activity cost pools appear below:
Processing | $11,492 |
Supervising | $60,800 |
Other | $27,600 |
Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: |
MHs (Processing) | Batches (Supervising) | |
Product M2 | 5,500 | 910 |
Product H2 | 16,600 | 370 |
Total | 22,100 | 1,280 |
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins. |
Product M2 | Product H2 | |
Sales (total) | $224,900 | $201,100 |
Direct materials (total) | $110,700 | $79,400 |
Direct labor (total) | $59,500 | $80,000 |
What is the overhead cost assigned to Product H2 under activity-based costing? |
$41,000
$8,632
$17,575
$26,207
B.)
Capizzi Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to three activity cost pools based on resource consumption. Data used in the first stage allocations follow:
Overhead costs: | |
Equipment depreciation | $83,500 |
Supervisory expense | $5,000 |
Distribution of Resource Consumption Across Activity Cost Pools: | |||
Activity Cost Pools | |||
Machining | Order Filling | Other | |
Equipment depreciation | 0.40 | 0.30 | 0.30 |
Supervisory expense | 0.40 | 0.20 | 0.40 |
Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow: |
Activity: | ||
MHs (Machining) | Orders | |
Product Y7 | 1,370 | 1,160 |
Product V2 | 9,420 | 1,750 |
Total | 10,790 | 2,910 |
The activity rate for the Order Filling activity cost pool under activity-based costing is closest to: |
$6.38 per order
$89.50 per order
$8.95 per order
$5.95 per order
C.)
Bevard Nuptial Bakery makes very elaborate wedding cakes to order. The company has an activity-based costing system with three activity cost pools. The activity rate for the Size-Related activity cost pool is $1.32 per guest. (The greater the number of guests, the larger the cake.) The activity rate for the Complexity-Related cost pool is $31.62 per tier. (Cakes with more tiers are more complex.) Finally, the activity rate for the Order-Related activity cost pool is $81.33 per order. (Each wedding involves one order for a cake.) The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and shortening. The activity rates do not include the costs of purchased decorations such as miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders appear below: |
Euertz Wedding | Sparacio Wedding | |
Number of reception guests | 73 | 249 |
Number of tiers on the cake | 9 | 6 |
Cost of purchased decorations for cake | $19.45 | $79.85 |
Assuming that all of the costs listed above are avoidable costs in the event that an order is turned down, what amount would the company have to charge for the Euertz wedding cake to just break even? |
$481.72
$81.33
$19.45
$533.31
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