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[The following information applies to the questions displayed below. Kitchen King's Toledo plant manufactures three product lines, all multi-burner, ceramic cook tops. The plant's three

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[The following information applies to the questions displayed below. Kitchen King's Toledo plant manufactures three product lines, all multi-burner, ceramic cook tops. The plant's three product models are the Regular (REG), the Advanced (ADV). and the Gourmet (GMT). Until recently, the plant used a job- order product-costing system, with manufacturing overhead applied on the basis of direct-labor hours. The following table displays the basic data upon which the traditional costing system was based. $171 (9 hrs. $19 per hr.) $2e9 (11 hrs. $19 per hr.) hr 17,880 (17 MH x 1,888) The annual budgeted overhead is $1,224,000, and the company's predetermined overhead rate is $12 per direct-labor hour. The product costs for the three product models, as reported under the plant's traditional costing system, are shown GMT Direct labor (not including set-up time) 171.88 (9 hr. $19) 289.80 (11 hr $19) 247.8 (13 hr. $19) 188.8e (9 hr. $12) 132.8 (11 hr. $12) 156.8 (13 hr. $12) Kitchen King's pricing policy is to set a target price for each product equal to 130 percent of the full product cost. Due to price competition from other appliance manufacturers, REG units were selling at $525, and ADV units were selling for $628. These prices were somewhat below the firm's target prices. However, these results were partially offset by greater- than-expected profits on the GMT product line. Management had raised the price on the GMT model to $800, which was higher than the original target price. Even at this price, Kitchen King's customers did not seem to hesitate to place orders, Moreover, the company's competitors did not mount a challenge in the market for the GMT product line. NeverthelesS, concern continued to mount in Toledo about the difficulty in the REG and ADV markets. After all, these were the plant's bread-and-butter products, with projected annual sales of 5,000 REG units and 4,000 ADV units. Kitchen King's director of cost management, Angela Ramirez, had been thinking for some time about a refinement in the Toledo plant's product-costing system. Ramirez wondered if the traditional, volume-based system was providing management with accurate data about product costs. She had read about activity-based costing, and wondered if ABC would be an improvement to the plant's product-costing system. After some discussion, an ABC proposal was made to the company's top management, and approval was obtained. The data collected for the new ABC system is displayed in the tion ng 1. Show how the company's overhead rate of $12 per direct-labor hour was calculated hours Predetermined overhead rate per direct labor hour 2. Complete an activity-based costing analysis for Kitchen King's three product lines. (Round "Pool Rate" and "Actlvlty Cost per of Product" to 2 declmal pleces.) Cost Driver Cost for Product Production Cost per Cost Driver Cost Driver Quantity for Line Product Line Cost Pool Unit of Machine relatedS 310,500 Machine hours REG 50,000 48,000 17.000 GMT Total REG 115,000 S Material handling 52,500 Production runs GMT Total REG ADV GMT Total REG 100 S Purchasing 75,000 Purchase orders 100 104 300 S 85,000 Production runs GMT Total REG 100 S 27,500 Inspection hours GMT Total REG 1,100 S 88,000 Shipments GMT Total REG 1,100 S 32,500 ngineering 250 GMT Total REG 650 S 50,000 48,000 17.000 Facility 575.000 Machine hours GMT Total Grand total 115,000 S 3. Complete the table given below to calculate the new product cost for each product line under ABC. (Round your Intermedlete calculatlons and final answers to 2 declmal places.) REG ADV GMT Direct material Direct labor Total direct costs per unit Manufacturing overhead: 0.00 S0.00 0.00 Machine-related Material handling Purchasing Setup Inspection Shipping Engineering Facility Total ABC overhead cost per unitS Total product cost per unit 0.00 S 0.00 S 0.00 S 0.00 S 0.00 0.00 4. Complete the table given below to compare the overhead cost, total product cost, and target price for each product line under the wo alternative costing systems. (Round your Intermedlate calculatlons and final answers to 2 declmal places.) REG ADV GMT Reported unit overhead cost: Traditional, volume-based costing system Activity-based costing system Reported unit product cost (direct material, direct labor and overhead) Traditional, volume-based costing system Activity-based costing systenm Original target price (Based on traditional, volume-based costing system) New target price (Based activity-based costing system) Sales price data Actual current selling price 5. Was each of Kitchen King's three product lines overcosted or undercosted? By how much per unit? (Round your Intermedlate calculations and final answers to 2 declmal places.) REG ADV GMT per unit per unit per unit

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