Ch 5- Day 2 homework: 1) Medical Clinic has traditionally allocated its overhead using patient visits. The clinic is considering dropping its OB/GYN services or cutting the salary of these employees since the segment has lost money for several years. Their accounting intern suggests using activity based accounting for the next year before making a decision. To follow are the estimated overhead costs, cost pools, and usage rates for the upcoming year. Shared Cost Pools Billing & reception Building costs Common Equipment Overhead Cost Cost Driver $324,000 $240,000 $210,000 $90,000 $864,000 Patient Visits Square feet used Tests/Scans Administration Employees Total estimated overhead Radiology OB/GYN Surgery Patient visits 500 900 400 Square feet used Tests/Scans 1,600 1,800 1400 270 185 145 Employees 2 4 3 Estimates By Department Radiology $850,000 $170,000 $310,000 $85,000 OB/GYN $940,000 $85,000 $460,000 $20,000 Surgery $700,000 $115,000 $330,000 $15,000 Revenue Direct materials costs Direct labor costs Departmental equipment costs A. Traditionally overhead is allocated using the number of patient visits.. Calculate the overhead applied to each department using this method. B. Use activity based costing to determine the total overhead applied to each department. C. Determine the total profit by department using the traditional method and the ABC method. See next page... ) Yo Co. makes two products and expects to incur the following overhead costs next year: Machining Setup $80,000 $40,000 $50,000 $170,000 Packaging Total Overhead Costs Yo Co expects the following next year: Prod 1 Prod 2 Total 5,000 Machining hours Number of setups Units Direct Labor 1,000 4,000 20 20 40 15,000 $20,000 $60,000 35,000 $80,000 $50,000 50,000 Direct Materials a What is the PDO assuming a single plant-wide rate based on direct labor cost? b. Using traditional method, how much overhead is assigned products 1? Product2? c. Using traditional method, what is the total cost of product 1? Product 2? d. If sales are $120,000 for prod 1 & $320,000 for prod 2, what is the gross profit per unit using the single plant-wide rate? e. Use activity based costing to come up with ABC rates. f Using ABC, how much overhead is assigned to prod 1? Prod 2? & Using ABC, what is the total product cost of prod 1? Prod 2? h. If sales are $120,000 for prod 1 & $320,000 for prod 2, what is the gross profit per unit using ABC? See next page... 3) Production Company makes 3 products: product A, B, and C. Shown below are the estimated costs and estimated production data for next year. Cost Pools Customer Service Design Storage Ordering & Receiving Packaging Supervision Overhead Costs $360,000 $240,000 $120,000 $60,000 $180,000 $120,000 Cost Driver Customers Modifications Square feet used Number of orders Number of units Number of employees Prod C Prod A Prod B 100 Customers Modifications Square feet used Number of orders Number of units Number of employees 40 60 15 25 10 1,000 600 400 60 80 20 6,000 2,000 4,000 1 3 Estimates By Product Sales Direct materials costs Direct labor costs Prod A $2,400,000 $960,000 $600,000 Prod B $2,280,000 $600,000 $720,000 Prod C Total $1,980,000 $6,660,000 $480,000 $2,040,000 $1,080,000 $2,400,000 A) Calculate the overhead assigned to products A, B, & C using ABC method. B) Calculate total cost & net C) Calculate single plant-wide overhead rate (assume overhead allocation base is direct labor). D) Calculate the total overhead assigned to each product using the single plant-wide rate. E) Calculate total cost & net profit for each product using single plant-wide rate. profit for each product using ABC method