Question

Approximately Relevant ABC Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year: Activity Expected Cost Activity Driver Activity Capacity Setting up equipment $129,000 Number of setups 120 Ordering materials 15,300 Number of orders 900 Machining 92,400 Machine hours 11,550 Receiving 16,800 Receiving hours 1,050 Silven produces two models of cell phones with the following expected activity demands: Model X Model Y Units completed 5,900 11,800 Number of setups 80 40 Number of orders 300 600 Machine hours 6,600 4,950 Receiving hours 350 700 Required: 1. Determine the total overhead assigned to each product using the four activity drivers. Total Overhead Assigned Model X Model Y 2. Determine the total overhead assigned to each model using the two most expensive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs. Round interim calculations to two decimal places and round your final answers to the nearest dollar, Total Overhead Assigned Model X S Model Y 3. Using ABC as the benchmark, calculate the percentage error. Round your answers to two decimal places. Model X Percentage Error % % Modely

Answer 1

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A B С D E F G H I J K 1 2 Expected cost Model X Model y 3 Activity Setting up Equipment Ordering materials Machining Receiving 4 Activity Driver 129000 Number of setups 15300 Number of order 92400 Machine hours 16800 Receiving hours Activity Capacity Overhead Rate 120 1075 Per set up 900 17 Per order 115501 8 Per Machine hour 1050 16 Per receiving hour 11800 40 Units completed Number of setups Number of order Machine hours Receiving hours 5900 80 3001 6600 5 600 6 4950 700 7 350 1 Model X Model Y 9 43000 10200 10 Total overhead assignment Setting up Equipment Ordering materials Machining Receiving Total overhead assignment 86000 5100 52800 5600 11 39600 11200 12 13 149500 104000 14 15 16 2 17 Activity Setting up equipment Machining Budgeted Activity Cost Driver Quantity 147703.252 Number of setups 105796.748 Machine Hours Overhead rate 120 1230.860434 Per set up 11550 9.159891599 Per Machine hour 18 19 20 Model X Model Y 98468.83469 49234.41734 21 Total overhead assignment Setting up equipment Machining Total overhead assignment 22 60455.28455 45341.46341 23 158924.1192 94575.88076 24

А B с D 24 25 26 3 3 Model X Model Y 149500 27 104000 28 Percentage Error Overhead using ABC system Overhead using reduced ABC system Difference / Error Percentage Error 158924.1192 94575.88076 29 9424.119241 6.30% -9424.119241 -9.06% 30 31 32

For calculation ref:

B с D E G H K Expected cost 129000 15300 92400 16800 Activity Driver Activity Capacity Overhead Rate Number of setups 120 =C3/E3 Per set up Number of order 900 I=C4/E4 Per order Machine hours 11550 =C5/E5 Per Machine hour Receiving hours 1050 =C6/E6 Per receiving hour Model X Model Y Units completed 5900 11800 Number of setups 80 40 Number of order 300 1600 Machine hours 6600 4950 Receiving hours 350 700 1 2 Activity 3 Setting up Equipment 4 Ordering materials 5 Machining 6 Receiving 7 8 1 Total overhead assignment 9 Setting up Equipment 10 Ordering materials 11 Machining 12 Receiving 13 Total overhead assignment 14 15 16 2 Activity 17 Setting up equipment 18 Machining 19 20 Total overhead assignment 21 Setting up equipment 22 Machining 23 Total overhead assignment 24 =J2 =$F3*14 =$F4*15 =$F5*J6 =$F6*J7 =SUM(C9:012) =K2 =$F3*64 |=$F4*K5 =$F5*K6 =$F6*K7 =SUM(D9:012) Budgeted Activity Cost Driver Quantity =(C3+(C3/(C3+C5)*(C4+C6))) Number of setups =E3 |=(C5+C5/(C3+C5)*(C4+C6))) Machine Hours =E5 Overhead rate =C17/E17 =C18/E18 =G3 =G5 Model X =$F17*14 =$F18*J6 =SUM(C21:C22) Model Y =$F17*K4 =$F18*K6 =SUM(D21:D22)

A B с D E 24 25 26 3 Percentage Error Model X 27 Overhead using ABC system =C13 28 Overhead using reduced ABC system =C23 29 Difference / Error =C28-C27 30 Percentage Error =C29/C27 31 Model Y =D13 =D23 =D28-D27 =D29/D27 32 33 34 25