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Plantwide versus Departmental Rates, Product - Costing Accuracy: Activity - Based Costing Ramsey Company produces speakers ( Model A and Model B ) . Both
Plantwide versus Departmental Rates, ProductCosting Accuracy: ActivityBased Costing Ramsey Company produces speakers Model A and Model B Both products pass through two producing departments. Model As production is much more laborintensive than that of Model B Model B is also the more popular of the two speakers. The following data has been gathered for the two products: Line Item Description Product Data Model A Product Data Model B Units produced per year Prime costs $ $ Direct labor hours Machine hours Production runs Inspection hours Maintenance hours Overhead costs: Line Item Description Amount Setup costs $ Inspection costs Machining Maintenance Total $ Required: Download Excel spreadsheet Question Content Area Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor hours. Round to two decimal places. Plantwide rate: fill in the blank of $ per DLH Model A: fill in the blank of $ overhead cost per unit. Model B: fill in the blank of $ overhead cost per unit. Question Content Area Compute the overhead cost per unit for each product by using ABC. Round rates and unit overhead costs to two decimal places. Model Answer Model A: fill in the blank of $ overhead cost per unit. Model B: fill in the blank of $ overhead cost per unit. Note: Be sure to complete both tables below. Activity Driver Activity Rate Setups fill in the blank of $ per Inspections fill in the blank of $ per Machining fill in the blank of $ per Maintenance fill in the blank of $ per Overhead assignment Line Item Description Model A Model B Setups fill in the blank of $ fill in the blank of $ Inspections fill in the blank of fill in the blank of Machining fill in the blank of fill in the blank of Maintenance fill in the blank of fill in the blank of Total overhead fill in the blank of $ fill in the blank of $ : Units produced fill in the blank of fill in the blank of Overhead per unit fill in the blank of $ fill in the blank of $ Question Content Area Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Department : machine intensive with a rate of $ per machine hour and Department : labor intensive with a rate of $ per direct labor hour. The consumption of these two drivers is as follows: Line Item Description Department Machine Hours Department Direct Labor Hours Model A Model B Compute the overhead cost per unit for each product by using departmental rates. Round to two decimal places. Model A: fill in the blank of $ per unit Model B: fill in the blank of $ per unit Question Content Area Conceptual Connection: Using the activitybased product costs as the standard, comment on the ability of departmental rates to improve the accuracy of product costing. Did the departmental rates do better than the plantwide rate? A common justification is to use fill in the blank of hours for machineintensive departments and fill in the blank of hours for laborintensive departments. Using activitybased costs as the standard, we can say the department rates fill in the blank of the accuracy of the overhead cost assignment for both products and were less accurate than the plantwide rates. The departmental rates cost A well fill in the blank of the ABC method while the plantwide rate costs Product A well fill in the blank of the ABC method. The departmental rates are not dramatically more wrong then the plantwide rate; however, they are wrong in a fill in the blank of direction. The departmental rates fill in the blank of do better than the plantwide rates.
Plantwide versus Departmental Rates, ProductCosting Accuracy: ActivityBased Costing
Ramsey Company produces speakers Model A and Model B Both products pass through two producing departments. Model As production is much more laborintensive than that of Model B Model B is also the more popular of the two speakers. The following data has been gathered for the two products:
Line Item Description Product Data
Model A Product Data
Model B
Units produced per year
Prime costs $ $
Direct labor hours
Machine hours
Production runs
Inspection hours
Maintenance hours
Overhead costs:
Line Item Description Amount
Setup costs $
Inspection costs
Machining
Maintenance
Total $
Required:
Download Excel spreadsheet
Question Content Area
Compute the overhead cost per unit for each product by using a plantwide rate based on direct labor hours. Round to two decimal places.
Plantwide rate: fill in the blank of $
per DLH
Model A: fill in the blank of $
overhead cost per unit.
Model B: fill in the blank of $
overhead cost per unit.
Question Content Area
Compute the overhead cost per unit for each product by using ABC. Round rates and unit overhead costs to two decimal places.
Model Answer
Model A: fill in the blank of $
overhead cost per unit.
Model B: fill in the blank of $
overhead cost per unit.
Note: Be sure to complete both tables below.
Activity Driver Activity Rate
Setups
fill in the blank of $
per
Inspections
fill in the blank of $
per
Machining
fill in the blank of $
per
Maintenance
fill in the blank of $
per
Overhead assignment
Line Item Description Model A Model B
Setups fill in the blank of $
fill in the blank of $
Inspections fill in the blank of
fill in the blank of
Machining fill in the blank of
fill in the blank of
Maintenance fill in the blank of
fill in the blank of
Total overhead fill in the blank of $
fill in the blank of $
: Units produced fill in the blank of
fill in the blank of
Overhead per unit fill in the blank of $
fill in the blank of $
Question Content Area
Suppose that Ramsey decides to use departmental overhead rates. There are two departments: Department : machine intensive with a rate of $ per machine hour and Department : labor intensive with a rate of $ per direct labor hour. The consumption of these two drivers is as follows:
Line Item Description Department
Machine Hours Department
Direct Labor Hours
Model A
Model B
Compute the overhead cost per unit for each product by using departmental rates. Round to two decimal places.
Model A: fill in the blank of $
per unit
Model B: fill in the blank of $
per unit
Question Content Area
Conceptual Connection: Using the activitybased product costs as the standard, comment on the ability of departmental rates to improve the accuracy of product costing. Did the departmental rates do better than the plantwide rate?
A common justification is to use fill in the blank of
hours for machineintensive departments and fill in the blank of
hours for laborintensive departments. Using activitybased costs as the standard, we can say the department rates fill in the blank of
the accuracy of the overhead cost assignment for both products and were less accurate than the plantwide rates. The departmental rates cost A well fill in the blank of
the ABC method while the plantwide rate costs Product A well fill in the blank of
the ABC method. The departmental rates are not dramatically more wrong then the plantwide rate; however, they are wrong in a fill in the blank of
direction. The departmental rates fill in the blank of
do better than the plantwide rates.
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