Question

Duration-Based Costing Gee Manufacturing produces two models of camshafts used in the production of automobile engines: Regular and High Performance. Gee currently uses an ABC system to assign costs to the two products. For the coming year, the company has the following overhead activities, costs, and activity drivers: Activity Expected Cost Activity Driver Activity Capacity Setups Machining Moving Total OH $214,612 $420,000 $112,500 $747,112 Setup hours Machine hours Move hours 10,000 20,000 5,000 At practical capacity, the expected activity demands for each product are as follows: ular Regular Performance Model Units completed Setup hours Machine hours Moving hours 30,000 8,000 6,000 1,000 High Performance Model 8,000 2,000 14,000 4,000 The production cycle time for the regular performance camshaft is 0.50 (hours per unit) and that of the high performance camshaft is 2.5 (hours per unit).

Answer 1

Gee Manufacturing produces two manufactirng
Activity	Expected cost($)-A	Activity Driver	Activity Capacity-B	Consumption Ratio(A/B)=C
set up	2,14,612	Set up Hrs	10,000	21.46
Machine	4,20,000	Machine Hrs	20,000	21.00
Moving	1,12,500	Move Hrs	5,000	22.50
Total	7,47,112
	Regular Performance- Model-D	Consumption Ratio(A/B)=C	Source	Cost(D*C)$	High Performance- Model-E	Consumption Ratio(A/B)=C	Cost(E*C)$
Units Completed	30,000				8,000
set up Hrs	8,000	21.46	Calculated as above)	1,71,690	2,000	21.46	42,922
Machine Hrs	6,000	21.00	Calculated as above)	1,26,000	14,000	21.00	2,94,000
Moving Hrs	1,000	22.50	Calculated as above)	22,500	4,000	22.50	90,000
Total cost				3,20,190			4,26,922
Hrs/ Unit	0.50						2.50
	Set Up cost $	Machine($)	Moving ($)	Total cost$
Regular Performance- Model-	1,71,690	1,26,000	22,500	3,20,190
High Performance- Model	42,922	2,94,000	90,000	4,26,922
	Unit completed	Total cost ($)	Cost/ unit ($/Unit)
Regular Performance- Model	30,000	3,20,190	10.67
High Performance- Model	8,000	4,26,922	53.37

Regular Performance- Model	0.50	30,000	15,000
High Performance- Model	2.50	8,000	20,000
Total			35,000
Activity	Expected cost($)-A
set up	2,14,612						5
Machine	4,20,000
Moving	1,12,500
Total	7,47,112
Now need to allocate expected cost among Regular Performance & High Performance based on hr (1:5) basis
	Hrs/ Unit(a)	Ratio
Regular Performance- Model	0.50	1
High Performance- Model	2.50	5	(2.50/0,5)
		6
	Basis of allocation	Cost $
Regular Performance- Model	(747112*1/6)	1,24,519
High Performance- Model	(747112*5/6)	6,22,593
Total		7,47,112
	Unit completed(M)	Cost ($)-N	Rate / Unit ($/unit)(N/M)
Regular Performance- Model	30,000	1,24,519	4.15
High Performance- Model	8,000	6,22,593	77.82