Question

points fotal Problem : ABC Traditional Costi Reese Corporation manufactures easy panese Information is available: llowing 2 Doint. unes easy chairs and reclin Easy Chairs OOOO 200 Viners The folle Total Cost $16,000 $27,000 250 So Machine setups Inspections Labor hours Costs Direct Labor Direct Materials Units: 2.000 5600 2.600 3050 $ 15,000 10,000 1,000 12,000 1.020 labor hours to activity-based costing, based Derse is considering switching from one ovest Answer the following quesitons: A. What is the predetermined overhead rate unde r sditional costs Work: 15,000+20,000+ 10,000+ 12000 5000 2600 + 2400 1950 le under the traditional cost system? + 10000 12 000 57 Answer (A) 8 B. What is the overhead per unit for Easy Chain.... Work: the traditional costing system Answer (B) . 20 20 25 000 5 3050 YA C. What is the overhead per unit for Recliners under the traditional costing system? Work: Answer (C) C 32000 . LT 3500 to 5 ton how Answer (D) $25 D. What is the total unit cost for Easy Chairs under the traditional costing system? de Work: 25000 bio oslode Hoy lotio bongo bolo 1,000 E. What is the total unit cost for Recliners under the traditional costing system? 329 Work: 32000 Tano 50 1000 do Toled robustibles Answer (E) $32 F. What is the predetermined overhead rate for machine setups under ABC? Work: 10000 000+200 Answer (R$ 2001

Answer 1

Answer A)

Calculation of Pre determined overhead rate under traditional cost system

Pre determined overhead rate = (Total machine set up overheads + Total inspection overheads)/ (Total labour hours in machine setups + Total labour hours in inspection)

                                                          = ($ 16,000 + $ 27,000)/ (2,600 labour hours +2,400 labour hours)

                                                          = $ 43,000/ 5,000 labour hours

                                                          = $ 8.60 per labour hour

Therefore the pre determined overhead rate under traditional cost system is $ 8.60 per labour hour.

Answer B)

Calculation of overhead rate per unit for Easy Chairs under traditional cost system

Total overheads allocated to Easy Chairs = (Total labour hours consumed X pre determined overhead rate based on labour hours)

                                                         = 2,600 labour hours X 8.60 per labour hour

                                                         = $ 22,360

Overhead rate per unit for Easy Chairs = Total allocated overheads/ Total number of units produced

                                                                      = $ 22,360/ 1,000 units

                                                                      = $ 22.36 per unit

Therefore overhead rate per unit for Easy Chairs under traditional cost system is $ 22.36 per unit.    

Answer C)

Calculation of overhead rate per unit for Recliners under traditional cost system

Total overheads allocated to Recliners = (Total labour hours consumed X pre determined overhead rate based on labour hours)

                                                         = 2,400 labour hours X 8.60 per labour hour

                                                         = $ 20,640

Overhead rate per unit for Recliners = Total allocated overheads/ Total number of units produced

                                                                      = $ 20,640/ 1,000 units

                                                                      = $ 20.64 per unit

Therefore overhead rate per unit for Recliners under traditional cost system is $ 20.64 per unit.    

Answer D)

Calculation of Total unit cost for Easy Chairs under traditional cost system

Total Unit Cost = (Direct Material Cost of Easy Chairs + Direct Labour Cost of Easy Chairs + Allocated overhead cost of easy Chairs)/ Total number of units of Easy Chairs produced

                               = ($ 10,000 + $ 15,000 + $ 22,360)/ 1,000 units

                               = $ 47,360/ 1,000 units

                              = $ 47.36 per unit

Therefore Total unit cost for Easy Chairs under traditional cost system is $ 47.36 per unit.    

Answer E)

Calculation of Total unit cost for Recliners under traditional cost system

Total Unit Cost = (Direct Material Cost of Recliners + Direct Labour Cost of Recliners + Allocated overhead cost of Recliners)/ Total number of units of Recliners produced

                               = ($ 12,000 + $ 20,000 + $ 20,640)/ 1,000 units

                               = $ 52,640/ 1,000 units

                              = $ 52.64 per unit

Therefore Total unit cost for Recliners under traditional cost system is $ 52.64 per unit.    

Answer F)

Calculation of Pre determined overhead rate for machine setups under Activity Based Costing

Pre determined overhead rate = (Total machine set up overheads)/ (Total number of machine setups for Easy Chairs + Total number of machine setups for Recliners)

                                                          = ($ 16,000)/ (200 Machine setups + 600 Machine setups)

                                                          = $ 16,000/ 800 machine setups

                                                          = $ 20 per machine setup

Therefore the pre determined overhead rate for machine setups under Activity Based Costing is $ 20 per machine setup.

Answer G)

Calculation of Pre determined overhead rate for inspections under Activity Based Costing

Pre determined overhead rate = (Total inspection overheads)/ (Total number of inspections for Easy Chairs + Total number of inspections for Recliners)

                                                          = ($ 27,000)/ (250 inspections + 500 inspections)

                                                          = $ 27,000/ 750 inspections

                                                          = $ 36 per inspection

Therefore the pre determined overhead rate for inspection under Activity Based Costing is $ 36 per inspection.

Answer H)

Calculation of overhead rate per unit for Easy Chairs under Activity Based Costing

Overhead rate per unit for Easy Chairs = (Total machine set up overheads allocated to easy chairs + Total inspection overheads allocated to easy chairs)/ Total number of units of easy chairs produced

                                 = ($ 4,000 +$ 9,000)/1,000 units

                                = $ 13,000/ 1,000 units

                                = $ 13.00 per unit

Therefore overhead rate per unit for Easy Chairs under Activity Based Costing is $ 13.00 per unit

Working Note:

Calculation of machine set up overheads allocated to Easy Chairs under Activity Based Costing

Machine setup overhead cost allocated to Easy Chairs = Total number of machine setups X overhead rate per machine set up

                                                                 = 200 machine set ups X $ 20 per machine set up

                                                                 = $ 4,000                

Therefore total machine setup overheads allocated to Easy Chairs is $ 4,000.

Calculation of Inspection overheads allocated to Easy Chairs under Activity Based Costing

Inspection overhead cost allocated to Easy Chairs = Total number of inspections X overhead rate per inspection

                                                                 = 250 inspections X $ 36 per inspection

                                                                 = $ 9,000                

Therefore total inspection overheads allocated to Easy Chairs is $ 9,000.

Answer I)

Calculation of overhead rate per unit for Recliners under Activity Based Costing

Overhead rate per unit for Recliners = (Total machine set up overheads allocated to Recliners + Total inspection overheads allocated to Recliners)/ Total number of units of Recliners produced

                                 = ($ 12,000 +$ 18,000)/1,000 units

                                = $ 30,000/ 1,000 units

                                = $ 30.00 per unit

Therefore overhead rate per unit for Recliners under Activity Based Costing is $ 30.00 per unit

Working Note:

Calculation of machine set up overheads allocated to Recliners under Activity Based Costing

Machine setup overhead cost allocated to Recliners = Total number of machine setups X overhead rate per machine set up

                                                                 = 600 machine set ups X $ 20 per machine set up

                                                                 = $ 12,000                

Therefore total machine setup overheads allocated to Recliners is $ 12,000.

Calculation of Inspection overheads allocated to Recliners under Activity Based Costing

Inspection overhead cost allocated to Recliners = Total number of inspections X overhead rate per inspection

                                                                 = 500 inspections X $ 36 per inspection

                                                                 = $ 18,000                

Therefore total inspection overheads allocated to Recliners is $ 18,000.

Answer J)

Calculation of Total unit cost for Easy Chairs under Activity Based Costing

Total Unit Cost = (Direct Material Cost of Easy Chairs + Direct Labour Cost of Easy Chairs + Machine set up overhead cost allocated to Easy Chairs +Inspection overhead cost allocated to Easy Chairs)/ Total number of units of Easy Chairs produced

                               = ($ 10,000 + $ 15,000 + $ 4,000 + $ 9,000)/ 1,000 units

                               = $ 38,000/ 1,000 units

                              = $ 38.00 per unit

Therefore Total unit cost for Easy Chairs under Activity Based costing is $ 38.00 per unit.    

Answer K)

Calculation of Total unit cost for Recliners under Activity Based Costing

Total Unit Cost = (Direct Material Cost of Recliners + Direct Labour Cost of Recliners + Machine set up overhead cost allocated to Recliners +Inspection overhead cost allocated to Recliners)/ Total number of units of Recliners produced

                               = ($ 12,000 + $ 20,000 + $ 12,000 + $ 18,000)/ 1,000 units

                               = $ 62,000/ 1,000 units

                              = $ 62.00 per unit

Therefore Total unit cost for Recliners under Activity Based costing is $ 62.00 per unit.