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Project Summary: The local bakery has been using job order costing and is deciding whether to use activity-based costing. The bakery makes many different products, including the one you produced in...

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Project Summary:

The local bakery has been using job order costing and is deciding whether to use activity-based costing. The bakery makes many different products, including the one you produced in the job order costing project. In this project, you will calculate the unit product cost under activity-based costing for the same bakery product you produced in the job order costing project.

Project Data:

The bakery has identified the following activity cost pools, cost drivers, and total yearly quantity for the cost drivers, and percentage of total estimated manufacturing overhead cost allocated to each cost pool. The bakery estimates $50,000 in total manufacturing overhead.

Activity Cost Pool Data

Activity Cost Pool

Cost Driver

Cost Driver Quantity

Percent of Total Manufacturing Overhead

Materials Ordering and Inspection

Number of purchase orders

1,500 orders

30%

Equipment Setup

Number of setups

750 setups

30%

Quality Control

Number of inspections

2,500 inspections

25%

Other

Number of direct labor hours

10,000 hours

15%

Project Requirements:

  1. Calculate total manufacturing overhead cost allocated to each activity cost pool.
  2. Calculate the activity rate for each activity cost pool.
  3. Estimate the cost driver quantity allocated to your bakery product from the job order costing project.Note: This will not be the entire cost driver quantity as the bakery makes many different products. Determine a reasonable estimate based on your product.
  4. Calculate manufacturing overhead allocated in the year to your bakery product.
  5. Estimate total units produced in the year and calculate manufacturing overhead per unit.
  6. Using direct materials per unit and direct labor per unit from the job order costing project, calculate unit product cost.
  7. In a few sentences, explain the differences in unit product cost between job order and activity-based costing.

Rubric

Activity Based Costing ProjectActivity Based Costing Project
CriteriaRatingsPts
This criterion is linked to a Learning OutcomeCalculation of Activity Rates (6 points)Objectives Calculate activity rates for an activity-based costing systemthreshold:4.0pts6pts
This criterion is linked to a Learning OutcomeCalculation of Total Allocated Manufacturing Overhead (6 points)Objectives Calculate manufacturing overhead allocated to the product under an activity-based costing systemthreshold:4.0pts6pts
This criterion is linked to a Learning OutcomeCalculation of Manufacturing Overhead per Unit (6 points)Objectives Calculate manufacturing overhead per unit under an activity-based costing system.threshold:4.0pts6pts
This criterion is linked to a Learning OutcomeCalculation of Unit Product Cost (6 points)Objectives Calculate unit product cost using activity-based costingthreshold:6.0pts6pts
This criterion is linked to a Learning OutcomeComparison of Job Order and Activity Based Costing (6 points)Objectives Compare product costs computed under job order and activity-based costing systemsthreshold:4.0pts6pts
Total Points:30
Answered 1 days AfterFeb 11, 2022

Solution

Deepanshu answered on Feb 13 2022
59 Votes
Answer:
1. Calculation of total manufacturing overhead cost allocated to each activity cost pool:
· Materials Ordering and Inspection = $50,000 * 30% = $15,000
· Equipment Setup = $50,000 * 30% = $15,000
· Quality Control = $50,000 * 25% = $12,500
· Other = $50,000 * 15% = $7,500
2. Calculation of the activity rate for each activity cost pool
· Materials Ordering and Inspection = $15,000 / 1,500 order = $10 per orde
· Equipment Setup = $15,000 / 750 setup = $20 per setup
· Quality Control = $12,500 / 2,500 inspection = $5 per inspection
· Other = $7,500 / 10,000 hours = $0.75 per hou
3....
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