APPENDIX A WORKSHEET 1 Traditional Costing Step 1: Calculate the single predetermined overhead rate using DL hours as your cost driver. Overhead Cost Pool (Cost Driver) Total Estimated Costs Total Estimated Cost Driver Bug Control (spiders) $500,000 100,000 Rodent Control (raccoons) $100,000 10,000 Safety Testing (wiggly eyes) $2,000,000 250,000 Transportation (trucks) $1,000,000 40.000 Utilities (windmills) $1,500,000 15.000 Security (sheriff stars) $300,000 20,000 Maintenance (tools) $150.000 75.000 Trainers (horses) $400,000 25,000 Bull Rentals (bulls) $2,500,000 12,500 Total Estimated Overhead $8.450,000 Total Estimated DL hours 42.250 Step 2: Count the actual amount of cost driver in your bag. (Hint: The number of people in your bag represents the total number of DL hours.) Step 3: Calculate the total overhead applied to your rodeo. OH Applied (from Step 3) Step 4: Calculate the total cost of your rodeo. Direct Materials Material Amount Cost per Total cost unit Hats $50 Boots $100 Horseshoes $30 Total DM Cost Direct Labor Number of Cost per Total Cost People person $100 Total Cost of your Rodeo: Total DM Cost: Total DL Cost: Total OH Applied: Total Cost of Rodeo: APPENDIX B WORKSHEET 2 ABC Costing Step 1: Calculate the OH Rate for each cost pool. Total Estimated Costs OH Rate Overhead Cost Pool (Cost Driver) Bug Control (spiders) Rodent Control (raccoons) Safety Testing (wiggly eyes) Transportation (trucks) Utilities (windmills) Security (sheriil stars) Maintenance (tools) Trainers (horses) Bull Rentals (bulls) Total Estimated Overhead Total Estimated DL hours S500,000 S100,000 $2,000,000 S1.000.000 S1.500.000 $300,000 S150,000 $400,000 $2,500,000 58.450.000 Total Estimated Cost Driver 100,000 10,000 250.000 40,000 15,000 20,000 75,000 25.000 12.500 Step 2: Count the actual amount of cost driver in your bag. # in your bag Cost Driver Spiders Raccoons Wiggly eyes Trucks Windmills Sheriff stars Tools Horses Bulls Applied OH Step 3: Calculate the total overhead applied to your rodeo. Overhead Cost Pool (Cost Driver) Oll Rate Bug Control (spiders) Rodent Control (raccoons) Safety Testing (wiggly eyes) Transportation (trucks) Utilities (windmills) Security (sheriff stars) Maintenance (tools) Trainers (horses) Bull Rentals (bulls Total Applied OH Step 4: Calculate the total cost of your rodeo. Direct Materials Material Amount OH Applied (from Step 3) per Total cost per Total Cost Direct Labor Number of Cost People person $100 Cost unit $50 $100 $30 Hats Boots Horseshoes Total DM Cost Total Cost of your Rodeo: Total DM Cost: Total DL Cost: Total OH Applied: Total Cost of Rodeo: Case Study 2 Activity-Based Costing Learning Objectives: This case study has three specific learning objectives . First, it reinforces the application of overhead to a production process by requiring students to understand overhead cost drivers and strengthens student understanding of how these costs are applied . Second, it enhances student comprehension of the differences between the traditional costing method using one con deiver to sign overhead, and the activity-based costing method using several cost drivers and cost pools to allocate the same overhead. Finally, students gain awareness of the importance of choosing appropriate cost drivers for specific cost pools Case Description: Happy-Whoopie Company sets up and organizes rodeo events across the country. Some of these rodeos are large and some are small, while others fall somewhere in between. The company expects to assign materials, labor, and overhead costs to each specific rodeo, Each rodeo bag contains different numbers of spiders, wiggly eyes, windmills, trucks, tools, etc. These represent Overhead costs. The bags also contain small plastic people, representing Direct Labor Howrs, and Hats Boots and Horseshoex indicating Direct Materials Traditionally, the company allocates manufacturing owerheads sering direct labor hours. To find an efficient way of allocating manufacturing overheads, the cost accountant, Mt. Maxwell is recommending shifting towards activity-based costing. After observing the production process and discussion with the factory workers, supervisors, and based on his previous experience, Mr. Maxwell has identified the different cost pools and appropriate cost drivers. However. Mr. Maxwell had a family emergency and took a leave and asked his junior to calculate the product costs for the period Requirements Complete the two worksheets to calculate the cost of the rodeo using the traditional and activity based costing Exhibit A Rodeo Bag Tools APPENDIX A WORKSHEET 1 Traditional Costing Step 1: Calculate the single predetermined overhead rate using DL hours as your cost driver. Overhead Cost Pool (Cost Driver) Total Estimated Costs Total Estimated Cost Driver Bug Control (spiders) $500,000 100,000 Rodent Control (raccoons) $100,000 10,000 Safety Testing (wiggly eyes) $2,000,000 250,000 Transportation (trucks) $1,000,000 40.000 Utilities (windmills) $1,500,000 15.000 Security (sheriff stars) $300,000 20,000 Maintenance (tools) $150.000 75.000 Trainers (horses) $400,000 25,000 Bull Rentals (bulls) $2,500,000 12,500 Total Estimated Overhead $8.450,000 Total Estimated DL hours 42.250 Step 2: Count the actual amount of cost driver in your bag. (Hint: The number of people in your bag represents the total number of DL hours.) Step 3: Calculate the total overhead applied to your rodeo. OH Applied (from Step 3) Step 4: Calculate the total cost of your rodeo. Direct Materials Material Amount Cost per Total cost unit Hats $50 Boots $100 Horseshoes $30 Total DM Cost Direct Labor Number of Cost per Total Cost People person $100 Total Cost of your Rodeo: Total DM Cost: Total DL Cost: Total OH Applied: Total Cost of Rodeo: APPENDIX B WORKSHEET 2 ABC Costing Step 1: Calculate the OH Rate for each cost pool. Total Estimated Costs OH Rate Overhead Cost Pool (Cost Driver) Bug Control (spiders) Rodent Control (raccoons) Safety Testing (wiggly eyes) Transportation (trucks) Utilities (windmills) Security (sheriil stars) Maintenance (tools) Trainers (horses) Bull Rentals (bulls) Total Estimated Overhead Total Estimated DL hours S500,000 S100,000 $2,000,000 S1.000.000 S1.500.000 $300,000 S150,000 $400,000 $2,500,000 58.450.000 Total Estimated Cost Driver 100,000 10,000 250.000 40,000 15,000 20,000 75,000 25.000 12.500 Step 2: Count the actual amount of cost driver in your bag. # in your bag Cost Driver Spiders Raccoons Wiggly eyes Trucks Windmills Sheriff stars Tools Horses Bulls Applied OH Step 3: Calculate the total overhead applied to your rodeo. Overhead Cost Pool (Cost Driver) Oll Rate Bug Control (spiders) Rodent Control (raccoons) Safety Testing (wiggly eyes) Transportation (trucks) Utilities (windmills) Security (sheriff stars) Maintenance (tools) Trainers (horses) Bull Rentals (bulls Total Applied OH Step 4: Calculate the total cost of your rodeo. Direct Materials Material Amount OH Applied (from Step 3) per Total cost per Total Cost Direct Labor Number of Cost People person $100 Cost unit $50 $100 $30 Hats Boots Horseshoes Total DM Cost Total Cost of your Rodeo: Total DM Cost: Total DL Cost: Total OH Applied: Total Cost of Rodeo: Case Study 2 Activity-Based Costing Learning Objectives: This case study has three specific learning objectives . First, it reinforces the application of overhead to a production process by requiring students to understand overhead cost drivers and strengthens student understanding of how these costs are applied . Second, it enhances student comprehension of the differences between the traditional costing method using one con deiver to sign overhead, and the activity-based costing method using several cost drivers and cost pools to allocate the same overhead. Finally, students gain awareness of the importance of choosing appropriate cost drivers for specific cost pools Case Description: Happy-Whoopie Company sets up and organizes rodeo events across the country. Some of these rodeos are large and some are small, while others fall somewhere in between. The company expects to assign materials, labor, and overhead costs to each specific rodeo, Each rodeo bag contains different numbers of spiders, wiggly eyes, windmills, trucks, tools, etc. These represent Overhead costs. The bags also contain small plastic people, representing Direct Labor Howrs, and Hats Boots and Horseshoex indicating Direct Materials Traditionally, the company allocates manufacturing owerheads sering direct labor hours. To find an efficient way of allocating manufacturing overheads, the cost accountant, Mt. Maxwell is recommending shifting towards activity-based costing. After observing the production process and discussion with the factory workers, supervisors, and based on his previous experience, Mr. Maxwell has identified the different cost pools and appropriate cost drivers. However. Mr. Maxwell had a family emergency and took a leave and asked his junior to calculate the product costs for the period Requirements Complete the two worksheets to calculate the cost of the rodeo using the traditional and activity based costing Exhibit A Rodeo Bag Tools