Question
Activity-Based Costing Slack Corporation has the following predicted indirect costs and cost drivers for 2016 for the given activity cost pools: Fabrication Department Finishing Department
Activity-Based Costing Slack Corporation has the following predicted indirect costs and cost drivers for 2016 for the given activity cost pools:
| Fabrication Department | Finishing Department | Cost Driver | |
|---|---|---|---|
| Maintenance | $32,000 | $22,000 | Machine hours |
| Materials handling | 30,000 | 15,000 | Material moves |
| Machine setups | 70,000 | 5,000 | Machine setups |
| Inspections | - | 25,000 | Inspection hours |
| $132,000 | $67,000 |
The following activity predictions were also made for the year:
| Fabrication Department | Finishing Department | |
|---|---|---|
| Machine hours | 10,000 | 5,000 |
| Material moves | 3,000 | 1,500 |
| Machine setups | 700 | 50 |
| Inspection hours | - | 1,000 |
It is assumed that the cost per unit of activity for a given activity does not vary between departments. Slack's president, Charles Slack, is trying to evaluate the company's product mix strategy regarding two of its five product models, ZX300 and SL500. The company has been using a company-wide overhead rate based on machine hours but is considering switching to either department rates or activity-based rates. The production manager has provided the following data for the production of a batch of 100 units for each of these models:
| ZX300 | SL500 | |
|---|---|---|
| Direct materials cost | $19,000 | $25,000 |
| Direct labor cost | $5,000 | $4,000 |
| Machine hours (Fabrication) | 500 | 700 |
| Machine hours (Finishing) | 200 | 100 |
| Materials moves | 30 | 50 |
| Machine setups | 5 | 9 |
| Inspection hours | 30 | 60 |
a. Determine the cost of one unit each of ZX300 and SL500, assuming a company-wide overhead rate is used based on total machine hours.
Round rate to two decimal places. Overhead rate based on total machine hours Answer per machine hour
Use rounded overhead rate calculated above for calculations below. Round cost answers to the nearest whole number. Round cost per unit to two decimal places.
| Product Costs per Unit | |||
|---|---|---|---|
| ZX300 | SL500 | ||
| Direct materials | |||
| Direct labor | |||
| Manufacturing overhead: | |||
| Total cost per batch | |||
| Number of units per batch | |||
| Cost per unit | |||
b. Determine the cost of one unit of ZX300 and SL500, assuming department overhead rates are used. Overhead is assigned based on machine hours in both departments.
Round rate to two decimal places, if applicable. Overhead rate based on machine hours for Fabrication Dept. $Answer per machine hour Overhead rate based on machine hours for Finishing Dept. $Answer per machine hour Use rounded overhead rate calculated above for calculations below. Round cost answers to the nearest whole number, when needed. Round cost per unit to two decimal places, if needed.
| Product Costs per Unit | ||
|---|---|---|
| Product Costs per Unit | ||
| ZX300 | SL500 | |
| Direct materials | ||
| Direct labor | ||
| Manufacturing overhead: | ||
| Fabrication Dept. | ||
| Finishing Dept. | ||
| Total cost per batch | ||
| Number of units per batch | ||
| Cost per unit | ||
c. Determine the cost of one unit of ZX300 and SL500, assuming activity-based overhead rates are used for maintenance, materials handling, machine setup, and inspection activities. Round rate to two decimal places, if applicable.
| Activity-based overhead rates: | ||
| Maintenance |
| |
| Materials handling |
| |
| Machine setup |
| |
| Inspection activities |
|
Use rounded overhead rate calculated above for calculations below. Round cost answers to the nearest whole number, when needed. Round cost per unit to two decimal places, if needed.
| Product Costs per Unit | ||
|---|---|---|
| ZX300 | SL500 | |
| Direct materials | ||
| Direct labor | ||
| Manufacturing overhead: | ||
| Maintenance activity | ||
| Materials handling activity | ||
| Machine setups activity | ||
| Inspections activity | ||
| Total cost per batch | ||
| Number of units per batch | ||
| Cost per unit | ||
PreviousSave AnswersNext
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Performance Auditing A Measurement Approach
Authors: Ronell B. Raaum CGAP CGFM, Stephen L. Morgan CIA CGAP CFE CGFM
2nd Edition
0894136607, 9780894136603
