Question

Gibson Networking develops software for internet applications. The market is very competitive, and Gibson Networking's competitors continue to introduce new products at low prices. Gibson Networking offers a wide variety of software—from simple programs that enable new users to create personal webpages to complex commercial search engines. Like most software companies, Gibson Networking's raw material costs are insignificant. Gibson Networking has just hired Nicole Merrell, a recent university graduate in accounting. Merrell asks Software Department Manager Jeff Gire to join her in a pilot activity based costing study. Merrell and Gire identify the following activities, related costs, and cost-allocation bases: (Click the icon to view the information.) Requirements Requirement 1. Compute the cost allocation rate for each activity. Determine the formula, then compute the cost allocation rate for each activity. (Round your answers to the nearest cent.) Activity overhead rate

Answer 1

Please hit LIKE button if this helped. Req. 1 Estimated indirect activity costs • Estimated quantity of cost allocation base Cost allocation rate Application Developments Content Production Testing $ $ $ $ 1,500,000 2,400,000 255,000 4,155,000 5 $ 12,000,000 $ 1,700 $ 300,000.00 per application 0.20 per line 150.00 per hour Req. 2 X-Page X-Secure $ 300,000 $ 300,000 Activity Costs per Unit Applications development (1 and 1) < $300,000 Content production (520,000 and 7,800,000) $0.20 Testing (150 and 900) < $150 Total indirect cost • Number of units Indirect activity cost per unit $ $ $ 104,000 $ 22,500 S 426,500 $ 60,000 7.11 $ 1,560,000 135,000 1,995,000 11 181,363.64 $ Req.3 X-Page X-Secure $ Indirect costs (12,000 and 18,000) $97 Number of units Indirect costs per unit 1,164,000 $ 60,000 19.40 $ 1,746,000 11 158,727.27 $ Req.4 X-Page $ $ X-Secure 7.11 $ 19.40 $ 181,363.64 158,727.27 ABC system Original system Fill in the blanks: Overcosted and Undercosted 50% more overheads 15 times 6 times recognizes more Req. 5 a. Different amount of sources b. high indirect c. high volumes of some software applications (X-Page) and low volumes of other software applications (X-Secure). d. a competitive environment and needs accurate product costs. e. accounting and information system expertise to implement the system.