Outdoor Adventures has monthly overhead (just manufacturing) of $1,410,000 which is divided into the following activity cost pools Setup costs Machine costs Purchasing and Receiving costs Engineering Costs Materials handling cost. Total M6: Outdoor Adventures Activity $60,000 350,000 420,000 400,000 180,000 $1,410,000 Outdoor Adventures-ABC Costin Outdoor Adventures is a contract provider that produces engine parts for small ve- hicles such as John Deere's Gator(pictured). Outdoor Adventures produces 2 parts, Part A and Part B. The competition is fierce among the contractors so to stay viable in the market, Outdoor Adventures needs to have a very accurate un- derstanding of its costs Required Using an excel file: 1. Calculate Outdoor Adventures' current company-wide overhead rate based on 2. Calculate the overhead cost per unit for Part A and Part B using traditional cost- 3. Calculate the manufacturing overhead costs for each part using activity-based Currently in the marketplace, Part A is experiencing extraordinary competition. On the other hand, Part B seems to have a corner on the market. Because of this, Out- door Adventures is considering dropping Part A to focus solely on Part B The market place situation, coupled with the fact that the product line manager for Part A is very skeptical of the cost reported to produce Part A, makes the controller Jackie Chen, very concerned there might be some problem with the current cost system. direct labor hours in Jackie Chen has expressed his concern to the CFO, Lois Lane. Lois has in- structed Jackie to conduct a thorough cost study to see if Part A's product manager skepticism has some validity costing, assuming each of the five cost pools represents a separate activity pool. Use the most appropriate activity driver for assigning activity costs to the two products 4. Label what type of activity measure (Transaction or Duration) each activity is 5. Compare Outdoor Adventures' current cost system to the results from using ABC costing(calculate and compare gross profit for each product under each method). Why might there be fierce competition for Part A, but little for Part E Part A Part E 100,000 21,000 $58$46 $17.06 $12.52 Production Units Selling Price Materials and direct labor cost per unit Overhead per unit (based on DL hours) Number of production runs Number of purchasing and receiving orders processed Number of machine hours Number of direct labor hours Number of engineering hours Number of material moves 6. What conclusions can we come to considering the product line manager's skep- ticism? 40 80 200 25,500 12,000 50,000 5,000 10,000 10,000 80 End of document