Exercise 9-44 (Algo) Activity-Based Costing versus Traditional Costing (LO 9-4, 5, 6) 1 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. 9.38/12.5 points awarded Scored Manufacturing overhead is currently assigned to products based on their direct labor costs. For the most recent month, manufacturing overhead was $253,600. During that time, the company produced 10,600 units of the M-008 and 2,100 units of the M-123. The direct costs of production were as follows. M-008 $ 84,800 Direct materials Direct labor M-123 $ 84,000 42,000 Total $ 168,800 126,800 84,800 Management determined that overhead costs are caused by three cost drivers. These drivers and their costs for last year were as follows. Cost Driver Number of machine-hours Number of production runs Number of inspections Total overhead Costs $ 66,600 90,000 97,000 $ 253, 600 Activity Level M-008 M-123 8,000 2,000 10 30 25 25 Total 10,000 40 50 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? 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? Complete this question by entering your answers in the tabs below. Required A Required 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.) M-008 M-123 $ 40 Total overhead Total unit cost 16 $ $ $ 32.00 100.00 Problem 9-68 (Static) Time-Based ABC: Time Equations (LO 9-9) 7 8.37/12.5 points awarded Kim Distribution Services (KDS) distributes food purchased in bulk to small retailers. The firm is divided into two divisions: Purchasing and Distribution. Purchasing is responsible for ordering goods from the manufacturer, receiving them, and then moving them to the appropriate location in the warehouse. Distribution is responsible for taking orders from retailers, picking the products from the warehouse for the orders, and packaging the orders for shipment. KDS has a policy of filling every order on the day of the order. If the firm is out of a particular item, it will ship a partial order and complete the order when the item is back in stock. Occasionally, an order will not have to be packaged if the retailer chooses to take delivery at the KDS loading dock. Scored Distribution has 15 employees who are responsible for the activities, and all 15 are trained to handle any of the three tasks. Each of these employees works 40 hours per week for 50 weeks. There is an allowance of 15 percent of the employees' time for training and other administrative tasks. The total costs of distribution for the coming year are estimated to be $826,200. When asked, the manager of Distribution estimated the following times for each of the three activities: Taking orders: 10 minutes. Picking orders: 14 minutes. Packaging orders: 20 minutes. Until now, KDS used commercial vendor to ship orders. The manager of Distribution believes the system described is too simple in two ways. First, if a retailer is ordering from KDS for the first time, Distribution has to take time to verify the Retailer details (shipping address, credit, and so on). The manager estimates this additional time to total 30 minutes. In addition, some orders are quite complex. This happens when a retailer orders many different items in one order. The manager estimates that a complex order takes an additional 20 minutes to pick, on average. Required: a. What is the total time required for taking an order? b. What is the total time required for picking an order? c. Compute the total cost of filling a complex order from a new retailer. Assume that all of the items in the order are in stock and that the retailer will not pick the order up at the KDS loading dock. (Do not round intermediate calculations. Round your answer to 2 decimal places.) a. Total time required for taking an order Total time required for picking an order Total costs 40 minutes 34 minutes b. C. 826,200.00 X
