* More Info a. oo o Indirect manufacturing labor costs such as supervision that supports direct manufacturing labor, $935,000 Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $650,000 Cost of indirect materials, $234,000 Costs incurred to set up machines each time a different product needs to be manufactured, $392,000 Designing processes, drawing process charts, and making engineering process changes for products, $236,900 Machine-related overhead costs such as depreciation, maintenance, production engineering, $865,000 (These resources relate to the activity of running the machines.) Plant management, plant rent, and plant insurance, $498,000 g. Print Done Roberta, Inc., manufactures elliptical machines for several well-known companies. The machines differ significantly in their complexity and their manufacturing batch sizes. The following costs were incurred in 2017: i (Click the icon to view the costs.) Read the requirements. Requirement 1. Classify each of the preceding costs as output unit-level, batch-level, product-sustaining, or facility-sustaining. Explain each answer. Cost Item Indirect manufacturing labor costs such as supervision that supports direct manufacturing labor, $935,000 Cost-type Output unit-level a. Procurement costs of placing purchase orders, receiving materials, and paying suppliers related to the number of purchase orders placed, $650,000 Batch-level Cost of indirect materials, $234,000 Output unit-level Costs incurred to set up machines each time a different product needs to be manufactured, $392,000 Batch-level Designing processes, drawing process charts, making engineering process changes for products, $236,900 Product-sustaining Machine-related overhead costs such as depreciation, maintenance, production engineering, $865,000 (These resources relate to the activity of running the machines.) Output unit-level Plant management, plant rent, and plant insurance, $498,000 Facility-sustaining Output unit-level costs are Batch-level costs are Facility-sustaining costs are Product-sustaining costs are Requirement 2. Consider two types of elliptical machines made by Roberta, Inc. One machine, designed for professional use, is complex to make and is produced in many batches. The other machine is simple to make and is produced in few batches. Suppose that Roberta needs the same number of machine-hours to make each type of elliptical machine and that Roberta allocates all overhead costs using machine-hours as the only allocation base. How, if at all, would the machines be miscosted? Briefly explain why. batch-level overhead resources compared to the simple elliptical machine that is made in batches. In addition, the complex machine will use The complex elliptical machine made in batches will use overhead resources because it is complex. if Roberta uses only Because machine-hours to allocate overhead costs to elliptical machines. As a result, the complex elliptical machine will be and the simple machine will be Requirement 3. How is the cost hierarchy helpful to Roberta in managing its business? The cost hierarchy can be helpful to Roberta in managing its business through: O A. Pricing and product mix decisions, cost reduction and process improvement decisions, design decisions, and planning and managing activities. OB. Reducing the number of indirect cost pools, creating less homogeneous indirect cost pools, allocating more indirect costs to cost objects, and identifying cost objects at the output unit-level O C. Identifying the cost benefit of implementing a simple costing system. OD. All of the above. Click to select your
