This question is based on Example #2 in the Chapter 4 Example packet. This example uses ABC to cost two different models of TV's. Assume all the data is the same as the problem in the packet, with the exception of the following numbers for the activity allocation base for all the Medium TV's (3000 TV's) produced. 347 # of material handling orders # of machine hours # of packaging hours 14,733 4,650 Assume that the activity based overhead rates do not change from what was calculated in the problem ($300 per material order handled, $14 per machine hour, and $9 per packaging hour) What is the total cost of producing 1 medium TV, including direct materials, direct labor and manufacturing overhead? Hint: remember that the $660,000 for direct materials and $216,000 for direct labor were for all 3000 medium TV's produced. Likewise, the overhead numbers that you will arrive at using the new activity allocation base numbers are for 3000 TV's. So don't forget to divide your final answer by 3000 to arrive at the cost of 1 TV. Round your final answer to the nearest whole number, and don't enter dollar signs. Example #4 - Cost of Quality Report ABC Company is preparing a cost of quality report. Based on the following data, prepare the report. Warranty Claims $420,000 Cost of defective products found at $94,000 the inspection point Training factory personnel $26,000 Recall of Batch #59374 $175,000 Inspecting products when halfway $55,000 through the production process Cost of disposing of rejected products $12,000 Preventative maintenance on factory $7,000 equipment Production loss due to machine $15,000 breakdowns Inspection of raw materials $5,000 Example #2 - ABC Costing compared to Plantwide Overhead Rate A company makes TV's. They have been using a plantwide overhead rate to allocate overhead costs to two TV models (using DL hours as the allocation base). The controller has asked his staff to do an analysis of the cost of the TV models using Activity Based Costing. This company normally prices their TV's at 300% of manufacturing cost. Presently this company is the low cost leader on Medium TV's, but faces competitive pressure on the Large TV's. Cost the two model of TV's under the two methodologies. Which TV's have been over or under-costed? Medium TV's Large TV's Total Direct Material $660,000 $1,240,000 Cost Total Direct Labor $216,000 $384,000 Cost Production Volume 3000 units 4000 units DL Hours 9000 16000 Total manufacturing overhead = $800,000 Primary production activities that make up Total Manufacturing Overhead: Cost Cost Driver Materials Handling $150,000 # material orders handled Machine Processing $560,000 #machine hours Packaging $90,000 #packaging hours Total $800,000 recus Cost the TW been over or under-costed? Medium TV's Large TV's Total Direct Material $660,000 $1,240,000 Cost Total Direct Labor $216,000 $384,000 Cost Production Volume 3000 units 4000 units DL Hours 9000 16000 Total manufacturing overhead = $800,000 Primary production activities that make up Total Manufacturing Overhead: Cost Cost Driver Materials Handling $150,000 # material orders handled Machine Processing $560,000 # machine hours Packaging $90,000 packaging hours Total $800,000 Medium TV's 300 Large TV's 200 Material Orders Handled Machine hours Packaging hours 20,000 4,000 20,000 6.000 This question is based on Example #2 in the Chapter 4 Example packet. This example uses ABC to cost two different models of TV's. Assume all the data is the same as the problem in the packet, with the exception of the following numbers for the activity allocation base for all the Medium TV's (3000 TV's) produced. 347 # of material handling orders # of machine hours # of packaging hours 14,733 4,650 Assume that the activity based overhead rates do not change from what was calculated in the problem ($300 per material order handled, $14 per machine hour, and $9 per packaging hour) What is the total cost of producing 1 medium TV, including direct materials, direct labor and manufacturing overhead? Hint: remember that the $660,000 for direct materials and $216,000 for direct labor were for all 3000 medium TV's produced. Likewise, the overhead numbers that you will arrive at using the new activity allocation base numbers are for 3000 TV's. So don't forget to divide your final answer by 3000 to arrive at the cost of 1 TV. Round your final answer to the nearest whole number, and don't enter dollar signs. Example #4 - Cost of Quality Report ABC Company is preparing a cost of quality report. Based on the following data, prepare the report. Warranty Claims $420,000 Cost of defective products found at $94,000 the inspection point Training factory personnel $26,000 Recall of Batch #59374 $175,000 Inspecting products when halfway $55,000 through the production process Cost of disposing of rejected products $12,000 Preventative maintenance on factory $7,000 equipment Production loss due to machine $15,000 breakdowns Inspection of raw materials $5,000 Example #2 - ABC Costing compared to Plantwide Overhead Rate A company makes TV's. They have been using a plantwide overhead rate to allocate overhead costs to two TV models (using DL hours as the allocation base). The controller has asked his staff to do an analysis of the cost of the TV models using Activity Based Costing. This company normally prices their TV's at 300% of manufacturing cost. Presently this company is the low cost leader on Medium TV's, but faces competitive pressure on the Large TV's. Cost the two model of TV's under the two methodologies. Which TV's have been over or under-costed? Medium TV's Large TV's Total Direct Material $660,000 $1,240,000 Cost Total Direct Labor $216,000 $384,000 Cost Production Volume 3000 units 4000 units DL Hours 9000 16000 Total manufacturing overhead = $800,000 Primary production activities that make up Total Manufacturing Overhead: Cost Cost Driver Materials Handling $150,000 # material orders handled Machine Processing $560,000 #machine hours Packaging $90,000 #packaging hours Total $800,000 recus Cost the TW been over or under-costed? Medium TV's Large TV's Total Direct Material $660,000 $1,240,000 Cost Total Direct Labor $216,000 $384,000 Cost Production Volume 3000 units 4000 units DL Hours 9000 16000 Total manufacturing overhead = $800,000 Primary production activities that make up Total Manufacturing Overhead: Cost Cost Driver Materials Handling $150,000 # material orders handled Machine Processing $560,000 # machine hours Packaging $90,000 packaging hours Total $800,000 Medium TV's 300 Large TV's 200 Material Orders Handled Machine hours Packaging hours 20,000 4,000 20,000 6.000