Question

Help Save & Exit Submit Check my work Jordan Electronics produces video games in three market categories: commercial, home, and miniature. Jordan has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers: Category Unit Total Pooled Cost $ 722,000 Cos Machine hours Batch 607,600 Types of Costs Indirect labor wages, supplies, factory utilities, machine maintenance Materials handling, inventory storage, labor for setups, packaging, labeling and shipping, scheduling Research and development Rent, general utilities, maintenance, facility depreciation, admin. salaries Number of prod Product Facility 211,900 478,500 Time spent by Square footage Additional data for each of the product lines follow: Total Direct materials cost Direct labor cost Number of labor hours Number of machine hours Number of production orders Research and development time Number of units Square footage Commercial $36.90/unit $ 14.00/hour 5,400 16,000 280 15 20,000 19,000 Home $ 24.10/unit $ 14.00/hour 12,900 49,000 1,900 198 49,000 50,000 Miniature $ 30.90/unit $ 18.50/hour 1,900 11,000 920 66% 19,000 18,000 20,200 76,000 3,100 1008 88,000 87,000 < Prev 4 of 6 !!! Next > 76 PAMTALA RIWXpe

Answer 1

a) Estimated total mfg. overhead cost Estimated direct labor hours (DLHS) Companywide overhead rate/DLH $2,020,000 $722000 + $607600 + $211900 + $478500] 20,200 $100 ($2020000 / 20200 DLHs] Direct labor hours Companywide overhead rate/DLH Overhead costs assigned Add: Direct material cost Add: Direct labor cost Total product costs Divided by number of units produced Unit product cost Commerical 5,400 $100 $540,000 $738,000 $75,600 $1,353,600 20,000 $67.68 Home Miniature 12,900 1,900 $100 $100 (As calculated above] $1,290,000 $190,000 [5400 x $100; 12900 x $100; 1900 x $100] $1,180,900 $587,100 [20000 x $36.9; 49000 x $24.1; 19000 x $30.9] $180,600 $35,150 [5400 x $14; 12900 x $14; 1900 x $18.5] $2,651,500 $812,250 49,000 19,000 $54.11 $42.75 ($1353600 / 20000; $2651500 / 49000; $812250 / 19000] Combined Cost of three products $54.74 [Total product costs / Total units produced = ($1353600 + $2651500 + $812250) / (20000 + 49000 + 19000) = $54.74] b) Activity Cost Pool Cost Driver Activity Cost Volume Activity Rate Unit Batch Product Facility machine hours prod. orders time spent Sq. footage $722,000 $607,600 $211,900 $478,500 3,100 100% 87,000 $9.50 [$722000 / 76000] $196.00 [$607600 / 3100] $211,900.00 [$211900 / 100%] $5.50 [$478500 / 87000]

280 Activity Activity Overhead costs assigned to Commerical: Rate Usage Unit machine hours $9.50 16,000 Batch prod. orders $196.00 Product time spent $211,900.00 15% Facility Sq. footage $5.50 19,000 Overhead costs assigned to Commerical: Add: Direct material cost Add: Direct labor cost Total product costs Divided by number of units produced Activity Cost $152,000 ($9.5 x 16000] $54,880 ($196 x 280] $31,785 [$211900 x 15%] $104,500 [$5.5 x 19000] $343,165 $738,000 [20000 units x $36.9] $75,600 [5400 hours x $14] $1,156,765 20,000 $57.84 ($1156765 / 20000 units] Activity Activity Overhead costs assigned to Home: Rate Usage Unit machine hours $9.50 49,000 Batch prod. orders $196.00 1,900 Product time spent $211,900.00 19% Facility Sq. footage $5.50 50,000 Overhead costs assigned to Home: Add: Direct material cost Add: Direct labor cost Total product costs Divided by number of units produced Unit product cost Activity Cost $465,500 [$9.5 x 49000] $372,400 [$196 x 1900] $40,261 ($211900 x 19%] $275,000 $5.5 x 50000] $1,153,161 $1,180,900 [49000 units x $24.1] $180,600 (12900 hours x $14] $2,514,661 49,000 $51.32 ($2514661 / 49000 units]

Activity Activity Overhead costs assigned to Miniature: Rate Usage Unit machine hours $9.50 11,000 Batch prod. orders $196.00 920 Product time spent $211,900.00 66% Facility Sq. footage $5.50 18,000 Overhead costs assigned to Miniature: Add: Direct material cost Add: Direct labor cost Total product costs Divided by number of units produced Unit product cost Activity Cost $104,500 ($9.5 x 11000] $180,320 ($196 x 920] $139,854 ($211900 x 66%] $99,000 ($5.5 x 18000] $523,674 $587,100 (19000 units x $30.9) $35,150 [1900 hours x $18.5] $1,145,924 19,000 $60.31 ($1145924 / 19000 units] Therefore, Combined Cost of three products = $54.74 [Total product costs / Total units produced = ($1156765 + $2514661 + $1145924) / (20000 + 49000 + 19000) = $54.74]