Question
The Alloy Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in smartphones. Consider the following data regarding component T24 (amounts are per
The
Alloy
Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in smartphones. Consider the following data regarding component T24 (amounts are per unit):
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(Click the icon to view the data table.)
.....
The activities required to build the component follow:
)Read the requirements
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.
Requirement 1. Complete the missing items for the two tables.
Begin by completing the table for the total indirect activity costs.
| Activity | Allocation Base | Costs Allocated to Each Unit | ||||
|---|---|---|---|---|---|---|
| Start station | Number of raw component chasiss | 6 | $1.10 | = | $6.60 | |
| Dip insertion | Number of dip insertions |
| 0.50 | = | 14.00 | |
| Manual insertion | Number of manual insertions | 11 | 0.70 | = |
| |
| Wave solder | Number of components soldered | 6 | 1.70 | = | 10.20 | |
| Backload | Number of backload insertions | 8 |
| = | 5.60 | |
| Test | Number of testing hours | 0.42 | 70.00 | = |
| |
| Defect analysis | Number of defect analysis hours | 0.10 |
| = | 5.00 | |
| Total activity-based costs |
|
|
|
|
| |
Now, complete the table for the total manufacturing product cost.
| Direct materials cost | $85.00 |
|---|---|
| Direct labor cost | 23.00 |
| Activity-based costs allocated |
|
| Total manufacturing product cost |
|
Requirement 2. Why might managers favor this ABC system instead of
Alloy's
older system, which allocated all manufacturing overhead costs on the basis of direct labor hours?Managers favor this multiple-rate, activity-based costing system because it better pinpoints
activities
direct labor costs
direct labor hours
revenues
for planning andcontrol and it provides more accurate data for
factory payroll.
inventory planning.
product costing.
product scheduling.
Direct materials cost
$85.00
Direct labor cost
23.00
Activity-based costs allocated
?
Total manufacturing product cost
?
Activity
Allocation Base
Costs Allocated to Each Unit
Start station
Number of raw component chasiss
6
$1.10
=
$6.60
Dip insertion
Number of dip insertions
?
0.50
=
14.00
Manual insertion
Number of manual insertions
11
0.70
=
?
Wave solder
Number of components soldered
6
1.70
=
10.20
Backload
Number of backload insertions
8
?
=
5.60
Test
Number of testing hours
0.42
70.00
=
?
Defect analysis
Number of defect analysis hours
0.10
?
=
5.00
Total activity-based costs
Activity
Allocation Base
Costs Allocated to Each Unit
Start station
Number of raw component chasiss
6
$1.10
=
$6.60
Dip insertion
Number of dip insertions
?
0.50
=
14.00
Manual insertion
Number of manual insertions
11
0.70
=
?
Wave solder
Number of components soldered
6
1.70
=
10.20
Backload
Number of backload insertions
8
?
=
5.60
Test
Number of testing hours
0.42
70.00
=
?
Defect analysis
Number of defect analysis hours
0.10
?
=
5.00
Total activity-based costs
Activity
Allocation Base
Costs Allocated to Each Unit
Start station
Number of raw component chasiss
6
$1.10
=
$6.60
Dip insertion
Number of dip insertions
?
0.50
=
14.00
Manual insertion
Number of manual insertions
11
0.70
=
?
Wave solder
Number of components soldered
6
1.70
=
10.20
Backload
Number of backload insertions
8
?
=
5.60
Test
Number of testing hours
0.42
70.00
=
?
Defect analysis
Number of defect analysis hours
0.10
?
=
5.00
Total activity-based costs
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Corporate Finance
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
13th International Edition
1265533199, 978-1265533199
