Notre Dame College
MBA 540 Accounting
Week 3
Assignment 3-2
Total points: 50
1. This is a numerical assignment. The maximum points are shown against each problem given below.
2. Show the complete work before you give the final answer. (Please show your work to receive full points.)
3. Analytical approach is expected where a question is descriptive in nature.
1. (3 Points) The following activities occur at the Company that manufactures a variety of products.
a.
setup cost pools
b.
assembly cost pool
c.
maintenance cost pool
d.
supervising cost pool
e.
material cost pool
f.
machine cost pool
Required: Identify appropriate cost drivers for above cost pools:
Work and Solution:
COST Pools
Cost Drive
a.
setup cost pools
b.
assembly cost pool
c.
maintenance cost pool
d.
supervising cost pool
e.
material cost pool
f.
machine cost pool
2. (4 Points) The following activities occur at the Company that manufactures a variety of products.
Activity
Level
a.
Receive raw materials from suppliers.
b.
Engaging in price negotiations with the company's supplier of credit card flash drives.
c.
Do rough milling work on products.
d.
Printing a banne
e.
Periodic maintenance of the equipment used to process wristband flash drives.
f.
Issuing raw materials
g.
Preparing shipping documents and packaging for a customer order.
h.
Preparing shipping documents and packaging for a customer order.
Required: Classify each of the activities above as either a unit-level, batch level, product level, or organization -sustaining activity.
Work and Solution:
Activity
Level
a.
Receive raw materials from suppliers.
b.
Engaging in price negotiations with the company's supplier of credit card flash drives.
c.
Do rough milling work on products.
d.
Printing a banne
e.
Periodic maintenance of the equipment used to process wristband flash drives.
f.
Issuing raw materials
g.
Preparing shipping documents and packaging for a customer order.
h.
Preparing shipping documents and packaging for a customer order.
3. (3 Points) Activities and Cost Drivers
Activity
Cost Drive
Fringe benefits
Square feet
Electricity
Direct labor hours
Depreciation
Machine hours
Machine maintenance
Number of employees
Heat and air conditioning
Factory supervision
Required: Match the above activity with the most appropriate cost driver.
Work and Solution:
Activity
Cost Drive
Fringe benefits
Electricity
Building depreciation
Machine maintenance
Heat and air conditioning
4. (4 Points) These costs are associated with company’s production:
Production
110,000
Direct materials
$525
Direct labo
280
Variable manufacturing overhead
120
Fixed manufacturing overhead
$2,200,000
Required: Using the above information, what is the cost per unit under both variable and absorption costing?
Work and Solution:
Hint:
1. Calculate the Per-Unit Cost per Variable Costing.
2. Calculate the Per-Unit Cost per Absorption Costing
5. (10 Points) North Coast Manufacturing has the following costs associated with its production:
Beginning Inventory
0
Unit Produced
25,000
Unit Sold
20,000
Selling price per unit
$145
Variable sales and administrative expenses
$5
Fixed sales and administrative expenses
$975,000
Direct materials cost per unit
$25
Direct labor cost per unit
$11
Variable manufacturing overhead cost per unit
3
Fixed manufacturing overhead cost per unit
$980,000
Required: Prepare an income statement under both the absorption and variable costing methods along with a reconciliation between the two statements.
Work and Solution:
6. (10 points) Hockey Stick-Man company makes two different levels of hockey sticks: the Standard and the Slap Shot. The total overhead of $800,000 has traditionally been allocated by direct labor hours, with 500,000 hours for the Standard and 300,000 hours for the Slap Shot. After analyzing and assigning costs to two cost pools, it was determined that machine hours is estimated to have $450,000 of overhead, with 30,000 hours used on the Standard product and 15,000 hours used on the Slap Shot product. It was also estimated that the inspection cost pool would have $150,000 of overhead, with 25,000 hours for the Standard and 5,000 hours for the Slap Shot.
Required:
Calculate the overhead rate per product, under traditional and under ABC costing?
Work and Solution:
7. (6 points) A Pharmaceutical Manufacturing makes two type of Plastic Syringe products: Generic and Original. It estimates it will produce 423,694 units of Generic and 652,200 of Original, and the overhead for each of its cost pools is as follows:
Cost Pool
Estimated Overhead
Material receipts
$133,000
Machine setups
300,000
Assembly
700,000
Inspection
250,000
Total
1,383,000
It has also estimated the activities for each cost driver as follows:
Cost Drive
Generic
Label
Inspections
400
600
Machine setups
450
950
Parts
300
400
Setups
250
350
Required:
Calculate the overhead allocated to each unit of Generic and Label?
Work and Solution:
8. (10 points) Tri-bikes manufactures two different levels of bicycles: the Standard and the Extreme. The total overhead of $300,000 has traditionally been allocated by direct labor hours, with 150,000 hours for the Standard and 50,000 hours for the Extreme. After analyzing and assigning costs to two cost pools, it was determined that machine hours is estimated to have $200,000 of overhead, with 4,000 hours used on the Standard product and 1,000 hours used on the Extreme product. It was also estimated that the setup cost pool would have $100,000 overhead, with 1,000 hours for the Standard and 1,500 hours for the Extreme.
Required:
(a) Calculate the overhead rate under traditional costing.
(b) Calculate the amount of overheads charged to Standard and Extreme bicycles as under traditional costing.
(c) Calculate the overhead rates for Machine Pool and Setup Pool under ABC costing.
(d) Calculate the amount of overheads charged to Standard and Extreme bicycles as under ABC costing.
(e) Write your observation about the shift in the overheads getting charged between the two product lines. Which system of charging overheads would you recommend? Why?
Work and Solution:
Notre Dame College
MBA 540 Accounting
Week
3
Assignment
3
-
2
Total points: 50
1.
This is a numerical
assignment. The maximum points are shown against each problem
given below.
2.
Show the complete work before you give the final answer.
(Please show your work to
eceive full points.)
3.
Analytical approach is expected where a question is descriptive in nature.
1.
(
3
Points)
The following
activities occur at the Company that manufactures a variety of
products
.
a.
setup cost pools
.
assembly cost pool
c.
maintenance cost pool
d.
supervising cost pool
e.
material cost
pool
f.
machine cost pool
Required
:
Identify appropriate cost drivers for
above
cost pools:
Work and Solution
:
COST Pools
Cost Drive
a.
setup cost pools
.
assembly cost pool
c.
maintenance cost pool
d.
supervising cost pool
e.
material cost
pool
f.
machine cost pool
Notre Dame College
MBA 540 Accounting
Week 3
Assignment 3-2
Total points: 50
1. This is a numerical assignment. The maximum points are shown against each problem
given below.
2. Show the complete work before you give the final answer. (Please show your work to
eceive full points.)
3. Analytical approach is expected where a question is descriptive in nature.
1. (3 Points) The following activities occur at the Company that manufactures a variety of
products.
a. setup cost pools
. assembly cost pool
c. maintenance cost pool
d. supervising cost pool
e. material cost pool
f. machine cost pool
Required: Identify appropriate cost drivers for above cost pools:
Work and Solution:
COST Pools Cost Driver
a. setup cost pools
. assembly cost pool
c. maintenance cost pool
d. supervising cost pool
e. material cost pool
f. machine cost pool