Required information Exercise 4-2 Compute Activity Rates (LO4-2] (The following information applies to the questions displayed below.) Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools: Activity Cost Pool Labor-related Machine-related Machine setups Production orders Product testing Packaging General factory Estimated Overhead Cost $ 20,400 $ 2,000 $ 20,400 $ 18,400 $ 29,600 $ 79,200 $ 58,000 Expected Activity 10,000 direct labor-hours 8,000 machine-hours 600 setups 400 orders 800 tests 3,600 packages 10,000 direct labor-hours Exercise 4-2 Part 1 Required: 1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Labor-related Machine-related Machine setups Production orders Product testing Packaging General factory Activity Rate per DLH per MH per setup per order per test per package per DLH Required information Exercise 4-2 Compute Activity Rates (L04-2] [The following information applies to the questions displayed below.] Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools: Activity Cost Pool Labor-related Machine-related Machine setups Production orders Product testing Packaging General factory Estimated Overhead Cost $ 20,400 $ 2,000 $ 20,400 $ 18,400 $ 29,600 $ 79,200 $ 58,000 Expected Activity 10,000 direct labor-hours 8,000 machine-hours 600 setups 400 orders 800 tests 3,600 packages 10,000 direct labor-hours Exercise 4-2 Part 2 2. Compute the company's predetermined overhead rate, assuming that the company uses a single plantwide predetermined overhead rate based on direct labor-hours. (Round your answer to 2 decimal places.) Predetermined overhead rate per DLH Exercise 4-9 Compute and Use Activity Rates to Determine the Costs of Serving Customers [LO4-2, LO4-3] Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to dozens of hospitals. In the face of declining profits, Med Max decided to implement an activity-based costing system to improve its understanding of the costs incurred to serve each hospital. The company broke its selling and administrative expenses into four activities as shown below: Activity Cost Pool Customer deliveries Manual order processing Electronic order processing Line item picking Total selling and administrative expenses Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Total Cost $ 495,900 385,400 220, 440 540,500 $1,642,240 Total Activity 5,700 deliveries 4,700 orders 13,200 orders 470,000 line items Med Max gathered the data below for two of the many hospitals that it servesCity General and County General: Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Activity City County General General 15 30 0 60 20 0 120 280 Required: 1. Compute the activity rate for each activity cost pool. 2. Compute the total activity costs that would be assigned to City General and County General. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.) Activity Cost Pool Customer deliveries Manual order processing Electronic order processing Line item picking Activity Rate per delivery per manual order per electronic order per line item picked Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to dozens of hospitals. In the face of declining profits, Med Max decided to implement an activity-based costing system to improve its understanding of the costs incurred to serve each hospital. The company broke its selling and administrative expenses into four activities as shown below: Activity Cost Pool Customer deliveries Manual order processing Electronic order processing Line item picking Total selling and administrative expenses Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Total Cost Total Activity $ 495,900 5,700 deliveries 385,400 4,700 orders 220, 440 13,200 orders 540,500 470,000 line items $1,642, 240 Med Max gathered the data below for two of the many hospitals that it serves-City General and County General: Activity Measure Number of deliveries Number of manual orders Number of electronic orders Number of line items picked Activity City County General General 15 30 0 60 20 0 120 280 Required: 1. Compute the activity rate for each activity cost pool. 2. Compute the total activity costs that would be assigned to City General and County General. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the total activity costs that would be assigned to City General and County General. (Do not round intermediate calculations.) ABC Cost City County General General Activity Cost Pool Customer deliveries Manual order processing Electronic order processing Line item picking Total activity costs Problem 4-15 Contrasting ABC and Conventional Product Costs [LO4-2, LO4-3, LO4-4) Marine, Inc., manufactures a product that is available in both a flexible and a rigid model. The company has made the rigid model for years, the flexible model was introduced several years ago to tap a new segment of the market. Since introduction of the flexible model, the company's profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the flexible model have been increasing rapidly. Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year, management estimated that $652,500 in overhead costs would be incurred and the company would produce and sell 1,000 units of the flexible model and 12,500 units of the regular model. The flexible model requires 2.5 hours of direct labor time per unit, and the regular model requires 1.25 hours. Direct materials and labor costs per unit are given below: Flexible Rigid $135 $90 Direct materials cost per unit Direct labor cost per unit $ 40 $25 Required: 1-a. Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. 1-b. Compute the unit product cost for one unit of each model. 2. An intern suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea. It came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities are listed as follows: Expected Activity Estimated Overhead Cost Total Flexible Rigid 120 370 $ 24,500 490 Activity Cost Pool and Activity Measure Purchase orders (number of orders) Rework requests (number of requests) Product testing (number of tests) Machine related (machine- hours) 14,500 85 205 290 190,000 800 720 1,520 423,500 1,200 4,850 6,050 $652,500 Compute the activity rate for each of the activity cost pools. 3-a. Using activity-based costing, determine the total amount of overhead that would be assigned to each model for the year. 3-b. Using activity-based costing, compute the unit product cost for one unit of each model. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Reg 2 Req Req 3B Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. Predetermined overhead rate per DLH Problem 4-15 Contrasting ABC and Conventional Product Costs (L04-2, L04-3, L04-4] Marine, Inc., manufactures a product that is available in both a flexible and a rigid model. The company has made the rigid model for years; the flexible model was introduced several years ago to tap a new segment of the market. Since introduction of the flexible model, the company's profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the flexible model have been increasing rapidly. Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year, management estimated that $652,500 in overhead costs would be incurred and the company would produce and sell 1,000 units of the flexible model and 12,500 units of the regular model. The flexible model requires 2.5 hours of direct labor time per unit, and the regular model requires 1.25 hours. Direct materials and labor costs per unit are given below: Flexible Rigid $135 $90 Direct materials cost per unit Direct labor cost per unit $ 40 $25 Required: 1-a. Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. 1-b. Compute the unit product cost for one unit of each model. 2. An intern suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea. It came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities are listed as follows: Expected Activity Estimated Overhead Cost Flexible Total Rigid 370 $ 24,500 120 490 Activity Cost Pool and Activity Measure Purchase orders (number of orders) Rework requests (number of requests) Product testing (number of tests) Machine related (machine- hours) 14,500 85 205 290 190,000 800 720 1,520 423,500 1,200 4,850 6,050 $652,500 Compute the activity rate for each of the activity cost pools. 3-a. Using activity-based costing, determine the total amount of overhead that would be assigned to each model for the year. 3-b. Using activity-based costing, compute the unit product cost for one unit of each model. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Reg 2 Req Req 3B Compute the unit product cost for one unit of each model. Unit Product Cost Flexible Rigid Problem 4-15 Contrasting ABC and Conventional Product Costs [LO4-2, LO4-3, LO4-4] Marine, Inc., manufactures a product that is available in both a flexible and a rigid model. The company has made the rigid model for years; the flexible model was introduced several years ago to tap a new segment of the market. Since introduction of the flexible model, the company's profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the flexible model have been increasing rapidly. Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year, management estimated that $652,500 in overhead costs would be incurred and the company would produce and sell 1,000 units of the flexible model and 12,500 units of the regular model. The flexible model requires 2.5 hours of direct labor time per unit, and the regular model requires 1.25 hours. Direct materials and labor costs per unit are given below: Direct materials cost per unit Direct labor cost per unit Flexible Rigid $135 $90 $ 40 $25 Required: 1-a. Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. 1-b. Compute the unit product cost for one unit of each model. 2. An intern suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea. It came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities are listed as follows: Expected Activity Estimated Overhead Cost Rigid Total Flexible 120 $ 24,500 370 490 Activity Cost Pool and Activity Measure Purchase orders (number of orders) Rework requests (number of requests) Product testing (number of tests) Machine related machine- hours) 14,500 85 205 290 190,000 800 720 1,520 423,500 1,200 4,850 6,050 $652,500 Compute the activity rate for each of the activity cost pools. 3-a. Using activity-based costing, determine the total amount of overhead that would be assigned to each model for the year. 3-b. Using activity-based costing, compute the unit product cost for one unit of each model. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Reg 2 Reg 3A Req 3B Compute the activity rate for each of the activity cost pools. Activity Cost Pool Purchase orders Rework requests Product testing Machine-related Activity Rate per order per request Iper test per MH Problem 4-15 Contrasting ABC and Conventional Product Costs (L04-2, LO4-3, LO4-4) Marine, Inc., manufactures a product that is available in both a flexible and a rigid model. The company has made the rigid model for years; the flexible model was introduced several years ago to tap a new segment of the market. Since introduction of the flexible model, the company's profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the flexible model have been increasing rapidly. Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year, management estimated that $652,500 in overhead costs would be incurred and the company would produce and sell 1,000 units of the flexible model and 12,500 units of the regular model. The flexible model requires 2.5 hours of direct labor time per unit, and the regular model requires 1.25 hours. Direct materials and labor costs per unit are given below: Direct materials cost per unit Direct labor cost per unit Flexible Rigid $135 $90 $ 40 $25 Required: 1-a. Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. 1-b. Compute the unit product cost for one unit of each model. 2. An intern suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea. It came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities are listed as follows: Expected Activity Estimated Overhead Cost Flexible Rigid 120 370 Total 490 $ 24,500 Activity Cost Pool and Activity Measure Purchase orders (number of orders) Rework requests (number of requests) Product testing (number of tests Machine related (machine- 14,500 85 205 290 190,000 800 720 1,520 1,200 4,850 hours) 6,050 423,500 $652,500 Compute the activity rate for each of the activity cost pools. 3-a. Using activity-based costing, determine the total amount of overhead that would be assigned to each model for the year. 3-b. Using activity-based costing, compute the unit product cost for one unit of each model. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req Reg 3B Using activity-based costing, determine the total amount of overhead that would be assigned to each model for the year. Total Amount of Overhead Flexible Rigid Problem 4-15 Contrasting ABC and Conventional Product Costs (LO4-2, LO4-3, L04-4) Marine, Inc., manufactures a product that is available in both a flexible and a rigid model. The company has made the rigid model for years; the flexible model was introduced several years ago to tap a new segment of the market. Since introduction of the flexible model, the company's profits have steadily declined, and management has become concerned about the accuracy of its costing system. Sales of the flexible model have been increasing rapidly. Overhead is applied to products on the basis of direct labor-hours. At the beginning of the current year, management estimated that $652,500 in overhead costs would be incurred and the company would produce and sell 1,000 units of the flexible model and 12,500 units of the regular model. The flexible model requires 2.5 hours of direct labor time per unit, and the regular model requires 1.25 hours. Direct materials and labor costs per unit are given below: Flexible Rigid $135 $90 Direct materials cost per unit Direct labor cost per unit $ 40 $25 Required: 1-a. Compute the predetermined overhead rate using direct labor-hours as the basis for allocating overhead costs to products. 1-b. Compute the unit product cost for one unit of each model. 2. An intern suggested that the company use activity-based costing to cost its products. A team was formed to investigate this idea. It came back with the recommendation that four activity cost pools be used. These cost pools and their associated activities are listed as follows: Expected Activity Estimated Overhead Cost Flexible Rigid Total $ 24,500 120 370 490 Activity Cost Pool and Activity Measure Purchase orders (number of orders) Rework requests (number of requests) Product testing (number of tests) Machine related (machine- hours) 14,500 85 205 290 190,000 800 720 1,520 423,500 1,200 4,850 6,050 $652,500 Compute the activity rate for each of the activity cost pools. 3-a. Using activity-based costing, determine the total amount of overhead that would be assigned to each model for the year. 3-b. Using activity-based costing, compute the unit product cost for one unit of each model. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Reg 2 Req 3A Req 3B Using activity-based costing, compute the unit product cost for one unit of each model. (Do not round intermediate calculations and round your answers to 2 decimal places.) Unit Product Cost Flexible Rigid Exercise 4-3 Compute ABC Product Costs (L04-3] Larner Corporation is a diversified manufacturer of industrial goods. The company's activity-based costing system contains the following six activity cost pools and activity rates: Activity Cost Pool Activity Rates Labor-related $ 6.00 per direct labor- hour Machine- related $ 10.00 per machine-hour Machine setups $ 50.00 per setup Production orders $100.00 per order Shipments $120.00 per shipment General $ 10.00 per direct labor- factory hour Cost and activity data have been supplied for the following products: B52 J78 Direct materials cost per unit $ 4.50 Direct labor cost per unit $ 5.00 Number of units produced per year 2,000 $26.00 $ 6.00 100 Direct labor- hours Machine-hours Machine setups Production orders Shipments Total Expected Activity J78 B52 1,400 30 2,400 30 8 1 8 1 6 1 Required: Compute the unit product cost of each product listed above. (Do not round intermediate calculations. Round your answers to 2 decimal places.) J78 B52 Unit product cost Required information Chapter 4: Applying Excel Step 1: Download the Applying Excel form located on the left-hand side, under files. If you have trouble, the file is also located in D2L under Course Administration. Step 2: Then enter formulas in all cells that contain question marks. For example, in cell C17 enter the formula "=B8*B10" Step 3: Check your worksheet by reducing the direct labor-hours for the Deluxe model in cell B10 from 5 to 2. The Deluxe model's unit product cost under traditional costing should now be $74.00 and the ABC unit product cost should be $143.89. If you do not get these results, fmd the errors in your worksheet and correct them. Step 4: Proceed to the requirements below only after completing your worksheet as it will be used to answer the following questions. Chapter 4: Applying Excel: Exercise Requirement 1: (a). Which of the following statements are true concerning the predetermined overhead rate when the direct labor-hour requirement for the Deluxe model dropped from 5 hours to 2 hours? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) 2 The predetermined overhead rate increased because the total direct labor-hours dropped. The predetermined overhead rate increased because the total estimated overhead cost increased. The predetermined overhead rate decreases because the total estimated overhead cost increased. The predetermined overhead rate decreased because the total direct labor-hours dropped. (b). Which of the following statements are true concerning the unit product costs for the Tourist model when the direct labor-hour requirement for the Deluxe model drops from 5 hours to 2 hours? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) 2 Economically, the fact that the Deluxe model's direct labor-hour requirement changed should have little or no impact on the cost of the Tourist model. 1 The traditional unit product cost of the Tourist model increases when the Deluxe model's direct labor-hour requirement decreases. The ABC unit product cost of the Tourist model increases when the Deluxe model's direct labor-hour requirement decreases, but by not by as much the traditional unit product cost. Requirement 2: Change the direct labor-hour requirement for the Deluxe model back to 5 hours in cell B10. Assume that the production orders change so that the Deluxe model will have 230 orders in cell C19 and the Tourist model will have 270 orders in cell D19. The Data area should now look like this: B D E Chapter 4: Applying Excel 1 2 3 Enter a formula into each of the cells marked with a ? below Review Problem: Activity-Based Costing 4 5 6 Data Deluxe Tourist 2,000 10,000 $ 25 $ 17 5 4 $ 12 per DLH 7 Annual sales in units 8 Direct materials per unit 9 Direct labor-hours per unit 10 11 Direct labor rate 12 13 14 Activities and Activity Measures 15 Labor related (direct labor-hours) 16 Machine setups (setup 17 Production orders (orders) 18 General factory (machine-hours) 19 20 21 Estimated Overhead Cost $ 80,000 150,000 70,000 250,000 $ 550,000 Expected Activity Deluxe Tourist 10,000 40,000 3,000 2,000 230 270 12,000 28,000 Total 50,000 5,000 500 40,000 (a). What is the traditional unit product cost for the Deluxe model after this change? Traditional unit product cost for the Deluxe model (b). Which of the following statements are true? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) The traditional unit product costs for the two models are unchanged by the change in production orders because traditional overhead allocations based on direct labor-hours ignore other cost drivers such as production orders. 1 The traditional unit product costs for the two models are unchanged by the change in production orders because neither the total estimated overhead cost nor the total direct labor-hours were affected. 1 The traditional unit product costs for the two models have been changed by the change in production orders because traditional overhead allocations based on direct labor-hours ignore other cost drivers such as production orders. (b). Which of the following statements are true? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) [? The traditional unit product costs for the two models are unchanged by the change in production orders because traditional overhead allocations based on direct labor-hours ignore other cost drivers such as production orders. The traditional unit product costs for the two models are unchanged by the change in production orders because neither the total estimated overhead cost nor the total direct labor-hours were affected. [? The traditional unit product costs for the two models have been changed by the change in production orders because traditional overhead allocations based on direct labor-hours ignore other cost drivers such as production orders. (c). What is the ABC unit product cost for the Deluxe model after this change? (Round your intermediate calculations and final answer to 2 decimal places.) ABC unit product cost for the Deluxe model (d). Which of the following statements are true concerning the effects of the change in production orders on the ABC unit product costs? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) The ABC unit product cost of the Deluxe model has increased and the ABC unit product cost of the Tourist model has decreased because a lower proportion of the production orders are now attributable to the Deluxe model. The ABC unit product cost of the Deluxe model has increased and the ABC unit product cost of the Tourist model has decreased because a higher proportion of the production orders are now attributable to the Deluxe model. The ABC unit product cost of the Deluxe model has decreased and the ABC unit product cost of the Tourist model has increased because a lower proportion of the production orders are now attributable to the Deluxe model. The ABC unit product cost of the Deluxe model has decreased and the ABC unit product cost of the Tourist model has increased because a higher proportion of the production orders are now attributable to the Deluxe model. Change the data in your worksheet so that it matches the following: B D E A 1 Chapter 4: Applying Excel 2 Enter a formula into each of the cells marked 3 with a ? below 4 Review Problem: Activity-Based Costing 5 Data 6 7 Annual sales in units 8 Direct materials per unit 9 Direct labor-hours per unit Deluxe Tourist 1,000 9,000 $ 47 $ 47 1 1 10 $ 27 per DLH 11 Direct labor rate 12 13 14. Activities and Activity Measures 15 Labor related (direct labor-hours) 16 Machine setups (setups) 17 Production orders (orders) 18 General factory (machine-hours) 19 20 21 Estimated Overhead Cost $ 35.000 120,000 70,000 150,000 $ 375,000 Expected Activity Deluxe Tourist 1,000 9,000 40 60 35 15 10,000 10,000 Total 10,000 100 50 20,000 (a). What is the traditional unit product cost for the Deluxe model now? (Round your intermediate calculations and final answer to 2 decimal places.) Traditional unit product cost for the Deluxe model (b). What is the traditional unit product cost for the Tourist model? (Round your intermediate calculations and final answer to 2 decimal places.) Traditional unit product cost for the Tourist model (c). What is the ABC unit product cost for the Deluxe model? (Round your intermediate calculations and final answer to 2 decimal places.) ABC unit product cost for the Deluxe model