Question

Activity-Based Costing Steampunk Corporation has the following predicted indirect costs and cost drivers for 2019 for the given activity cost pools: Fabrication Finishing Dement Department Center Maintenance 550.000 10000 Machine hours handing 90,000 45.000 Materal moves Machine 200.000 15.000 chines Inspections M The following activity predictions were also made for the years Fabrication Finishing Department Department Machine hours Material moves Machine Setups 350 5.00 It is assumed that the cost per unit of activity for a given activity does not vary between departments Steampunk's president, Abner Punk is trying to evaluate the companys product mix strategy regarding two of its product models, SW100 and 56150. The company has been using a company wide overhead rate based on machine hours but is considering switching to either department rates of activity based rate. The production manager has provided the following data for the production of a batch of 100 units for each of these models: SW100 SG 150 Direct mu s t 5 20000 10000 Direct labor cost SRLOO $6000 Machine hours braon 250 350 Machine hours Finishing Machine setups

Answer 1

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Steampunk
Answer a
Plant wide overhead rate	Fabrication	Finishing	Total	Note
Total Overhead cost	360,000.00	165,000.00	525,000.00	A
Total machine hours	5,000.00	2,500.00	7,500.00	B
Plant wide overhead rate			70.00	C=A/B
Machine hours used	SW100	SG150		Note
Fabrication	250.00	350.00		D
Finishing	100.00	50.00		E
Machine hours used	350.00	400.00		F=D+E
	See F	See C	G=F*C
Allocation of OH	Activity Driver	Plant wide OH rate	Total Overhead cost
SW100	350.00	70.00	24,500.00
SG150	400.00	70.00	28,000.00
Total	750.00		52,500.00	H
Total cost	SW100	SG150	Note
Direct material	20,000.00	30,000.00
Direct labor	8,000.00	6,000.00
OH cost	24,500.00	28,000.00	See H
Total cost	52,500.00	64,000.00	I
Units produced	100.00	100.00	J
Total cost per unit	525.00	640.00	K=I/J

Answer b
Plant wide overhead rate	Fabrication	Finishing		Note
Total Overhead cost	360,000.00	165,000.00		L
Total machine hours	5,000.00	2,500.00		M
Plant wide overhead rate	72.00	66.00		N=L/M
	O	See N	P=N*O	Q	See N	R=N*Q	S=P+R
	Fabrication			Finishing
Allocation of OH	Activity Driver	Plant wide OH rate	Overhead cost	Activity Driver	Plant wide OH rate	Overhead cost	Total Overhead cost
SW100	250.00	72.00	18,000.00	100.00	66.00	6,600.00	24,600.00
SG150	350.00	72.00	25,200.00	50.00	66.00	3,300.00	28,500.00
Total			43,200.00			9,900.00	53,100.00
Total cost	SW100	SG150	Note
Direct material	20,000.00	30,000.00
Direct labor	8,000.00	6,000.00
OH cost	24,600.00	28,500.00	See S
Total cost	52,600.00	64,500.00	T
Units produced	100.00	100.00	See J
Total cost per unit	526.00	645.00	U=T/J

Answer c		V	W	X=U+V	Y	Z	AA=Y+Z	AB=X/AA
Calculation of ABC rates for overhead		Cost			Cost Driver
Activity cost pool	Cost Driver	Fabrication	Finishing	Total	Fabrication	Finishing	Total	ABC rates
Mixing Department
Maintenance	Machines Hours	60,000.00	30,000.00	90,000.00	5,000.00	2,500.00	7,500.00	12.00
Materials Handling	Material Moves	90,000.00	45,000.00	135,000.00	1,500.00	750.00	2,250.00	60.00
Machine	Machine Setups	210,000.00	15,000.00	225,000.00	350.00	25.00	375.00	600.00
Inspections	Inspections Hours	-	75,000.00	75,000.00	-	500.00	500.00	150.00
Total Cost assigned		360,000.00	165,000.00	525,000.00
		See AB	See F	AC=AB*F	See F	AE=AB*F
			SW100		SG150
Allocation of OH	Cost Driver	ABC rates	Activity used	Cost assigned	Activity used	Cost assigned
Maintenance	Machines Hours	12.00	350.00	4,200.00	400.00	4,800.00
Materials Handling	Material Moves	60.00	20.00	1,200.00	40.00	2,400.00
Machine	Machine Setups	600.00	5.00	3,000.00	10.00	6,000.00
Inspections	Inspections Hours	150.00	100.00	15,000.00	50.00	7,500.00
OH cost				23,400.00		20,700.00

Total cost	SW100	SG150	Note
Direct material	20,000.00	30,000.00
Direct labor	8,000.00	6,000.00
OH cost	23,400.00	20,700.00	See AE
Total cost	51,400.00	56,700.00	AF
Units produced	100.00	100.00	See J
Total cost per unit	514.00	567.00	AG=AF/J