Question

Assign indirect costs to products or services using activity-based costing.

Calibri 11 A A 29 Wrap Text General Paste BIU- 30 Merge & Center - $ % Insert Delete Format 1 68 69 Conditional Format as Cell Formatting - Table Styles - Styles Clipboard Font Alignment Number Cells A1 v fi Sundial Co. has assigned $710,000 in total overhead cost to four different activity cost pools. The activity requirements for its two products lines, Economy А B с D E F H M 8.33 points 3 eBook G 1 Activity Requirements by Product Line Activity Deluxe Proportion Economy Model Proportion (%) Model (%) 2,000 3,000 300 900 2,000 20% 50% Print References Activity Cost Pool Overhead Cost Activity Cost Driver Activity Rate 5 Material Handling S 300,000 5,000 Material moves per move 6 Machine Set-Ups $ 210,000 Set-ups per set-up 7 Engineering Support Engineering hours $ 12.50 per hour 8 Power and Space 20,000 square feet. per sq. ft. 9 Total overhead cost 710,000 10 11 Use formulas to assign overhead to each product using both activity rates and activity proportions (%). 12 Create if/then statements to verify that the two methods produce the same results. 13 14 Overhead Assigned Using Activity Rates Overhead Assigned Using Activity Proportions (%) Verification: Create if/then statements to determine if the two methods produce identical results by indicating "pass" or "fail" Economy Deluxe Total Economy Deluxe Total Economy Deluxe Total 15 Activity Cost Pool 16 Material Handling 17 Machine Set-Ups 18 Engineering Support 19 Power and Space 20 Total Overhead Cost 21 לל Sheet1 +

Answer 1

Requirement Assign Indirect costs to Products or Services using Activity-Based Costing First, We shall Fill the Activity Proportion Schedule. For Material Handling and Machine Set-Ups, we have the information. So, we can determine the Activity Proportion through Each Model's Proportion = Total Activity Volume. For the Engineering Support Activity, they have given that Economy Model uses 20%. So, the Deluxe Model will have the remaining 80% proportion. For the Power and Space, Total Activity Volume is 20,00 Sq. Ft. It is also mentioned that Economy Model uses 50%. Therefore, thhe Deluxe Model also has 50%.

Economy Model Activity Proportion Deluxe Model Activity Proportion 2,000 40% 3,000 60% 300 25% 900 75% 2,000 20% 8,000 80% 10,000 50% 10,000 50%

Activity Cost Pool Overhead Cost Material Handling $ 300,000 Machine Set-Ups $ 210,000 Engineering Support $ 125,000 Power and Space $ 75,000 Total Overhead Cost $ 710,000 Activity Cost Driver Activity Rate 5,000 Material Moves $ 60.00 Per Move 1,200 Set-Ups $ 175.00 Per Set-Up 10,000 Engineering Hours $ 12.50 Per Hour 20,000 Square Feet $ 3.75 Per Sq. Ft. For the Calculation of Activity Rates, Since we have the Activity Cost Driver, We can determine the Activity Rate for the Materials Handling, Machine Set-Ups. For Engineering Support, Activity Rate has been given. Therefore, Overhead Cost = Activity Rate * Cost Driver Volume. For Power and Space, Overhead Cost = Total Overhead Costs - Overhead Costs of Other Activities. Then, we can determine the Activity Rate. Requirement Overheads assigned Using Activity Rates Activity Cost Pool Economy Deluxe Total Material Handling $ 120,000 $ 180,000 $ 300,000 Machine Set-Ups $ 52,500 $ 157,500 $ 210,000 Engineering Support $ 25,000 $ 100,000 $ 125,000 Power and Space $ 37,500 $ 37,500 $ 75,000 Total Overhead Cost $ 235,000 $ 475,000 $ 710,000 Requirement | Overheads assigned Using Activity Proportions Activity Cost Pool Economy Deluxe Total Material Handling $ 120,000 $ 180,000 $ 300,000 Machine Set-Ups $ 52,500 $ 157,500 $ 210,000 Engineering Support $ 25,000 $ 100,000 $ 125,000 Power and Space $ 37,500 $ 37,500 $ 75,000 Total Overhead Cost $ 235,000 $ 475,000 $ 710,000 Verification Activity Cost Pool Material Handling Machine Set-Ups Engineering Support Power and Space Total Overhead Cost Economy Pass Pass Pass Pass Pass Deluxe Pass Pass Pass Pass Pass Total Pass Pass Pass Pass Pass