Question

La Lusts to its three wine vallen . es five models of kitchen appliances. The company is Identified the following activities performed at its E17-8 Wilmington, Inc, manufactures five models of kitchen appliances installing activity-based costing and has identified the following act Mesa plant. 1. Designing new models. 2. Purchasing raw materials and parts. 3. Storing and managing inventory. 4. Receiving and inspecting raw materials and parts. 5. Interviewing and hiring new personnel. 6. Machine forming sheet steel into appliance parts. 7. Manually assembling parts into appliances 8. Training all employees of the company. 9. Insuring all tangible fixed assets. 10. Supervising production. 11. Maintaining and repairing machinery and equipment. 12. Painting and packaging finished appliances Having analyzed its Mesa plant operations for purposes of installing activity-based cost- ing, Wilmington, Inc. identified its activity cost centers. It now needs to identily relevant activity cost drivers in order to assign overhead costs to its products. Instructions Using the activities listed above, identify for each activity one or more cost drivers that might be used to assign overhead to Wilmington's five products. E17.9 Air United, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 300 pressure gauges were pro- duced, and overhead costs of $94,500 were estimated. An analysis of estimated overhead costs reveals the following activities. Activities 1. Materials handling 2. Machine setups 3. Quality inspections Cost Drivers Number of requisitions Number of setups Number of inspections Total Cost $40,000 21,500 33,000 $94,500 The cost driver volume for each product was as follows. Cost Drivers Number of requisitions Number of setups Number of inspections Instruments 400 200 200 Gauges 600 300 400 Total 1,000 500 600 Instructions (a) Determine the overhead rate for each activity (b) Assign the manufacturing overhead costs for April to the two products based costing. (e) Write a memorandum to the president of Air United explaint of activity-based costing. April to the two products using activity-

Answer 1

Ansvu As per the geven data, Wilmington Inc needs to identity relevant adivity cost drivers in order to assigo overhead costs to its products The following is the idea to dessine various cost Drivers a sharp cost drivers - Activity " Designing new models Number of various designs 2) Purchasing raw materias > . and parts No. of units of raw materials Purchased 3) storing and inventory managing . No. of units in the inventory 4) Receiving and inspecting raw materias and Pariz No. of units of no raw materials Purchased 5) Interviewing and hiring new personnel om No. of employees in each and various departments No. of par 6) machine forming sheet steel into appliance part formed 2 manually assembling parts into appliana = No. Of appliances manufacured or Produced.

Training all employees of No. of employees in each department 8) Trainin the company -> value of fixed asset as Insuring all tangible fixed assets o supervising Produ ction No. of units Produced or manufactured n maintaining and repairing machinery and equipment value of a fixed asset es painting and Packaging finished appliances No. of finished appliances pro- duced.