After reviewing the new activity-based costing system that Janis McGee has implemented at Joplin Industries's Port Arthur manufacturing facility, Kris Kristoff, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability. He plans to produce 118.000 units of J25P and 49,000 units of J40X in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the J25P and the J40X products by 17 percent J25P $1.518.000$2.436,000 Direct material Direct labor $ 768,000$ 636,000 396,000 $1.776,000$1.032 000 $3,294,000 $3.468,000 Assembly Packaging 1,008,000 Total direct labor Direct costs Overhead Assembly building Assembling@$30 per mh) Setting up machine (@ $900 per setup hour) Handling material (@$3,000 per run) 216.000$ 936.000 45,000378,000 138,000 33,000 Packaging building Inspecting and Packing(@$5 per direct labor-hour) Shipping (@ $1,320 per shipment) Total ABC overhead 336,000132,000 300,000 150,000 Total ABC cost Number of units Unit cost 780000$1.884,000 4,074.000 $5,352,000 49,000 $34.53 $ 109.22 118.000 Required Compute the amount of overhead allocated to the J25P and the J40X cameras for the first quarter using activity-based costing. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900 J25P J40X Doaktown Products manufactures fishing equipment for recreational uses. The Miramichi plant produces the company's two versions of a special reel used for river fishing. The two models are the M-008, a basic reel, and the M-123, a new and improved version. Cost accountants at company headquarters have prepared costs for the two reels for the most recent period. The plant manager is concerned. The cost report does not coincide with her intuition about the relative costs of the two models. She has asked you to review the cost accounting and help her prepare a response to headquarters Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $324,800. During that time, the company produced 14,300 units of the M-008 and 2,400 units of the M-123. The direct costs of production were as follows: 123 114,400 $ 96,000 S 210,400 Direct materials Direct labor 114,400 48,000 162,400 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows: Activity Level Costs M-008 M-123 Total 147,300 1,000 9,000 10,000 Cost Driver Number of machine-hours Number of production runs Number of inspections Total overhead 80,000 97.500 324,800 10 30 30 35 40 65 Required a. How much overhead will be assigned to each product if these three cost drivers are used to allocate overhead? What is the total cost per unit produced for each product? (Round your intermediate calculations and final answers to 2 decimal places.) M-008 M-123 Total overhead Total unit cost b. How much of the overhead will be assigned to each product if direct labor cost is used to allocate overhead? What is the total cost per unit produced for each product? (Round "Total unit cost" to 2 decimal places.) 123 Total overhead Total unit cost John's Custom Computer Shop (JCCS) assembles computers for both individual and corporate customers. The company is organized into two divisions: Personal and Business. Once a computer is built, it is shipped to the customer. Billing for all customers is handled by the corporate Accounts Receivable Department. Accounts Receivable performs two major activities: billing and dispute resolution. Billing refers to preparing and sending the bills as well as processing the payments. Dispute resolution occurs when a customer refuses to pay, usually due to an error in billing. The costs of the Accounts Receivable Department are allocated to the two divisions based on the number of bills prepared. Kyle, the manager of the business division, has complained that the allocated costs from Accounts Receivable are beginning to make the business division look unprofitable and has asked you to recommend some changes to the allocation system. If he agrees with your recommendation, he will pass them on to the chief financial officer. Data on costs and activities in the Accounts Receivable Department follow Number of bills prepared Number of disputes PersonalBusinessTotal 900 75 550 60 350 15 The Accounts Receivable department incurred the following costs during the year Billing Dispute resolution Total $ 31,500 37,500 S 69,000 Required a. Under the current allocation system, what is the cost that will be allocated from Accounts Receivable to Personal? To Business? (Do not round intermediate caiculations.) Allocated costs b. Suppose the company implements an activity-based cost system for Accounts Receivable with two activities, billing and dispute resolution. What is the cost that will be allocated from Accounts Receivable to Personal? To Business? Use the number of bills prepared as the cost driver for biling costs and the number of disputes for dispute resolution costs. Billing Dispute resolution Kitchen Supply, Inc. (KSI), manufactures three types of flatware: institutional, standard, and silver It applies all indirect costs according to a d rate based on direct labor-hours. A consulitant recently suggested that the company switch to an activity-based costing system and prepared the following cost estimates for year 2 for the recommended cost drivers. Cost D Number of orders Number of production runs Pounds of materials used S 42,000 180,000 390,000 280,000 0,800 135,000 $1,077,800 200 orders Seting up production 100 runs 130,000 pounds 14,000 hours Performing quality control Number of inspections Number of units 40 inspections 450,000 units Total estimated cost In addition, management estimated 7,900 direct labor-hours for year 2 Assume that the following cost driver volumes occured in January, year 2 Number of units produced Direct materials costs Direct labor-hours Number of orders Number of production runs Pounds of material 22,000 $36,000$26,000 450 9,000 $14.000 630 450 12 14,000 600 6,000 150 3,300 70 Number of inspections Units shipped 55,000 22.000 9.000 Actual labor costs were $14 per hour Required: a predetermined overhead rate for year 2 for each cost driver using the estimated costs and estimated cost driver units prepared by the consultant (Round your answers to 2 decimal places per order per run per pound per machine hour Using machines Performing quality control per uni (2) Compute a predetermined rate for year 2 using direct labor-hours as the allocation base, (Round your answer to 2 decimal places.) b. Compute the production costs for each product for January using direct labor-hours as the allocation base computed in requirement a(2). (Do not round intermediate calculations.) using direct labor-hours as the allocation base and the predetermined rate Direct materials Direct labor Indirect costs Total cost s 36,000$ 26.000s 14 00076,000 c. Compute the production costs for each product for January using the cost drivers recommended by the consultant and the predetermined rates computed in requirement a. (Note: Do not assume that total overhead applied to products in January will be the same for activity-based costing as it was for the labor-hour-based allocation.) (Do not round intermediate calculations.) Institutional Standard Silver 36,000 26,000 S 14,000 S 76,000 Direct materials Direct labor Indirect costs Processing orders Setting up production Handling materials Using machines Performing quality control Packing Total cost Cain Components manufactures and distributes various plumbing products used in homes and other buildings. Over time, the production staff has noticed that products they considered easy to make were difficult to sell at margins considered reasonable, while products that seemed to take a lot of stalf time were selling well despite recent price increases. A summer intem has suggested that the cost system might be providing misleading information. The controller decided that a good summer project for the inten would be to develop, in one self-contained area of the plant, an alternative cost system with which to compare the current system. The intern identified the following cost pools and, after discussion with some plant personnel, appropriate cost drivers for each pool. There were Cost Pools $ 735,000 Direct material cos 6,000,000 Machine-hours 922,500 Number of sel-ups Machine setup Shipping $ 2,100,000 Units shipped In this particular area, Cain produces two of its many products: Standard and Deluaxe. The folowing are data for production for the latest full year of operations: Dexe $200,000 $740,000 $340,000 $290,000 Total direct material costs Total direct labor costs Total number of setups Total pounds of material Total direct labor-hours Number of units produced and shipped 140.000 85 23,000 9,000 25,000 110,000 120 11,500 5.625 10.000 Required: a. 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? (Do not round intermediate calculations.) Direct costs Overhead Total costs Number of units Unit cost dentified above. What unilt product costs will be reported for the two products if b. The intern suggests an ABC system using the cost the ABC system is used? (Do not round intermediate calculations) Deluxe Direct Costs Overhead Machine setup Shipping Total costs Number of units Unit cost