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  • Homework Chapter 5: Requirement 1: Manufacturing Cost Per Unit - Traditional

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    Malene Mandrup Therkelsen
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    1. The document provides information on manufacturing costs per unit using traditional and activity-based costing (ABC) methods. ABC allocates overhead costs based on activities and cost drivers, resulting in different per unit costs than the traditional method. 2. It then gives an example of calculating overhead costs per box for a medical testing order using ABC. The overhead rate is calculated based on budgeted overhead and machine hours. 3. Finally, it compares the assigned overhead costs for a product using the traditional lump sum method versus ABC. ABC allocated more overhead, showing the traditional method undercosted by $2720.

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    Accounting 601 homework chapter 5

    Original Title

    Homework Chapter 5

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    1. The document provides information on manufacturing costs per unit using traditional and activity-based costing (ABC) methods. ABC allocates overhead costs based on activities and cost drivers, resulting in different per unit costs than the traditional method. 2. It then gives an example of calculating overhead costs per box for a medical testing order using ABC. The overhead rate is calculated based on budgeted overhead and machine hours. 3. Finally, it compares the assigned overhead costs for a product using the traditional lump sum method versus ABC. ABC allocated more overhead, showing the traditional method undercosted by $2720.

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    5 views2 pages

    Homework Chapter 5: Requirement 1: Manufacturing Cost Per Unit - Traditional

    Uploaded by

    Malene Mandrup Therkelsen
    1. The document provides information on manufacturing costs per unit using traditional and activity-based costing (ABC) methods. ABC allocates overhead costs based on activities and cost drivers, resulting in different per unit costs than the traditional method. 2. It then gives an example of calculating overhead costs per box for a medical testing order using ABC. The overhead rate is calculated based on budgeted overhead and machine hours. 3. Finally, it compares the assigned overhead costs for a product using the traditional lump sum method versus ABC. ABC allocated more overhead, showing the traditional method undercosted by $2720.

    Copyright:

    © All Rights Reserved
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    of 2

    Homework chapter 5:

    Question 1:

    Requirement 1: Manufacturing cost per unit - Traditional


    Direct labor hours=25.000
    Overhead (on the basis of direct-labor hours)=800.000
    POHR=800.000/25.000=32 predetermined overhead application rate

    Standard (costs per unit)


    DM=$24
    DL=3*$12=36
    OH=3(machine hours per unit)*32(POHR)=96
    Total=157

    Enhanced:
    DM=$40
    DL=4*12=48
    OH=4(machine hours per unit)*32(POHR)=128
    Total=216

    Requirement 2: Manufacturing cost per unit - ABC

    Activity pool Cost Activity Rate Standard Enhanced


    driver
    Order 150.000 /500 =$300 *300=90.000 *200=60.000
    processing
    Machine 560.000 /40.000 =$14 *18.000= *22000=308000
    processing 252000
    Product 90.000 /10.000 =$9 *2000=18000 *8000=72000
    inspection
    Total 360.000 980000
    / number of /3000 /4000
    units
    OH per unit $120 $110

    Manufacturing cost per unit – ABC:


    Standard: DM+DL+OH=24+36+120=181
    Enhanced: DM+DL+OH=40+48+110=198

    Requirement 3a
    Standard: 157 (traditional) – 181 (ABC) = -24 (Undercosted)
    Enhanced: 216 (traditional) – 198 (ABC) = 18 (Overcosted)

    Requirement 3b
    Yes.
    Question 2:

    Requirement 1 and 2

    Activity pool Cost Activity driver Rate Standard


    Machine setups 250.000 /125 =$2000 *5=10.000
    Material handling 75000 /37.500 =$2 *10.000= 20.000
    Hazardous waste 25.000 /5000 =$5 *2000=10.000
    control
    Quality control 75.000 /1000 =$75 *10=750
    Other overhead 200.000 /20.000 =$10 500=5000
    costs
    Total 45750
    / number of units /1.000
    OH per unit (box) $45.75

    Requirement 3:
    Overhead rate: budgeted overhead/budgeted machine hours=625.000/20.000=31.25 per machine hour

    Requirement 4:
    Total/applied overhead for the medical-testing order= POHR*actual machine hours=31.25*500=$15.625

    Overhead cost per box: 15.625/1000=$15.63 per box

    Question 3:

    Requirement 1
    Assigned cost (traditional): 105.000*0.15=18.900

    Assigned cost (ABC):


    Incoming material inspection: 18(rate)*20(quantity)=360
    In-process inspection: 0.32(rate)*40.000(quantity)=12800
    Product certification: 141(rate)*60(quantity)=8460
    Total=21620

    18.900-21.620=-2720 – traditional system undercosts by $2720

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