Attached is the question (document 7-55) and the excel spreadsheet we are to input our answers in.

Production-Based Costing versus Activity-Based Costing, Assigning Costs to Activities, Resource Drivers OBJECTIVE 1 2 Willow Company produces lawn mowers. One of its plants produces two versions of mowers: a basic model and a deluxe model. The deluxe model has a sturdier frame, a higher horsepower engine, a wider blade, and mulching capability. At the beginning of the year, the following data were prepared for this plant: Additionally, the following overhead activity costs are reported: Facility-level costs are allocated in proportion to machine hours (provides a measure of time the facility is used by each product). Receiving and materials handling use three inputs: two forklifts, gasoline to operate the forklift, and three operators. The three operators are paid a salary of each. The operators spend of their time on the receiving activity and on moving goods (materials handling). Gasoline costs . Depreciation amounts to . Required: (Note: Round answers to two decimal places.) 1. Calculate the cost of the materials handling activity. Label the cost assignments as driver tracing or direct tracing. Identify the resource drivers. Answer 2. Calculate the cost per unit for each product by using direct labor hours to assign all overhead costs. Answer 3. 4. 5. Calculate activity rates, and assign costs to each product. Calculate a unit cost for each product, and compare these costs with those calculated in Requirement 2. Calculate consumption ratios for each activity. CONCEPTUAL CONNECTION Explain how the consumption ratios calculated in Requirement 4 can be used to reduce the number of rates. Calculate the rates that would apply under this approach. Exercise 7-55 Name: Enter the appropriate amounts or formulas in the shaded cells. An asterisk (*) will appear in the column to the right of an incorrect amount. Essay answers will not be graded. Round unit cost to two decimal places. Pull data from the right side of the page as shown on the Excel demo problem 1. Materials handling overhead cost (estimated) Labor $0 * Time = Resource Driver Gasoline Moves = Resource Driver Depreciation Time = Resource Driver Total cost Total Overhead 2. POHR or the Plantwide rate = Unit cost: Prime costs Overhead: (enter POHR computed above X DLH) / Total Direct = Labor Hours hints: enter the % times $120,000 enter gas cost per move X move enter % times $16,000 Rate per DLH Basic Deluxe 3. Activity rates: enter = then click on data amounts Maintenance Overhead cost $114,000 / Activity = 4,000 Rate $28.50 per maintenance hour Engineering per engineering hour Materials handling per move Setting up per setup Purchasing per requisition Receiving per order processed Paying suppliers per invoice processed Providing space per machine hour Unit cost: enter = and click on data amount on right enter = and rate computed above Basic Deluxe Prime costs Overhead: x Rate Activity Maintenance: Basic Deluxe Engineering: Basic Deluxe Materials handling: Basic Deluxe Setting up: Basic Deluxe Purchasing: Basic Deluxe Receiving: Basic Deluxe Paying suppliers: Basic Deluxe Providing space: Basic Deluxe Total Units produced Unit cost (ABC) Unit cost (traditional) pull from part 2 answers The ABC costs are (more or less? _____) accurate. The basic model was (over or under? ___________ ) costed when using the plantwide overhead rate. The ABC costs are (more or less? _____) accurate. The basic model was (over or under? ___________ ) costed when using the plantwide overhead rate. 4. Consumption ratios: Maintenance Engineering Materials handling Setups Purchasing Receiving Paying suppliers Providing space Basic Deluxe basic + deluxe = 1.00 (100%) compute basic as cell AE16 divided by cell AI16 deluxe uses the rest of the maintenance 5. When activities are used in the same proportion by each model, the activities can be combined into one pool. For example maintenance and engineering are used in the same proportions by each model and can be combined into one cost pool. Instead of 8 cost pools, review your answers above to determine how many cost pools could be used: ______ The first pool would have an overhead rate computed as follows: maintenance $114,000 engineering total divided by either maint. or engineering hours = rate per (whichev Use maint. hours to compute the OH rate for pool 1: the total $ divided by 4,000 hours = If we instead used eng. the overhead rate per maint & eng'g would be the total divided by 6000 hours = 39 per eng. hou Again, the basic model is allocated .25 of the pool 1 OH cost. (3 X $40,000) e % times $120,000 as cost per move X moves % times $16,000 (2 x $8000) Data Beginning of year estimates: Expected quantity Selling price Prime costs Machine hours Direct labor hours Engineering support (hours) Receiving (orders processed) Materials handling (number of moves) Purchasing (number of requisitions) Maintenance (hours used) Paying suppliers (invoices processed) Setting up equipment (number of setups) Basic Model 40,000 $180 $80 5,000 10,000 1,500 250 1,200 100 1,000 250 16 Additionally the following overhead costs are reported: ntenance hour ineering hour er processed oice processed Maintaining equipment Engineering support Materials handling Setting up equipment Purchasing materials Receiving goods Paying suppliers Providing space Total Overhead $114,000 120,000 (compute as item 1 to the left) 96,000 60,000 40,000 ( includes allocated shares of forklift o 30,000 20,000 use this total overhead for item 2 AE16 divided by cell AI16 the maintenance ours = rate per (whichever was chosen, maint or engineering) hours per maint hour. The basic model will be allocate this rate X 1000 maint. hours or hours = 39 per eng. hour, the basic model would be allocated $39X 1500 hrs or $58,500 Deluxe Model 20,000 $360 $160 5,000 10,000 4,500 500 4,800 200 3,000 500 64 Total 60,000 NA NA 10,000 20,000 6,000 750 6,000 300 4,000 750 80 (compute as item 1 to the left) ( includes allocated shares of forklift operators' salaries) use this total overhead for item 2 on the left