(answered) Whitestone Company produces two

subassemblies JR 14 and RM 13

Whitestone Company produces two subassemblies, JR-14 and RM-13, used in manufacturing
trucks. The company is currently using an absorption costing system that applies o
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subassemblies-jr-14-and-rm-13

Whitestone Company produces two subassemblies, JR-14 and RM-13, used in manufacturing
trucks. The company is currently using an absorption costing system that applies overhead
based on direct-labor hours. The budget for the current year ending December 31, 20x 1 is as
follows:

.:.
Mark Ward, Whitestone’s president, has been reading about a product-costing method called
activity- bused costing. Ward is convinced that activity-based costing will cast a new light on
future profits. As a result. Brian Walters, Whitestone’s director of cost management, has
accumulated cost pool information for this year shown on the following chart. This information is
based on a product mix of 5,000 units of JR-14 and 5,000 units of RM-13,

.:.
In addition, the following information is projected for the next calendar year, 20x2

.:.
On January 1, 20x2, Whitestone is planning to increase the prices of JR-14 to $355 and RM-13
to $455, Material costs are not expected to increase in 20x2, but direct labor will increase by 8
percent, and all manufacturing overhead costs will increase by 6 percent. Due to the nature of
the manufacturing process, the company does not have any beginning or ending work-in-
process inventories.
Whitestone uses a just-in-time inventory system and ha materials delivered to the production
facility directly from the vendors. The raw-material inventory at both the beginning and the end
of the month is immaterial and can be ignored for the purposes of a budgeted income
statement. The company uses the first-in, lust-out (FIFO) inventory method.
Required:
1. Explain how activity-based costing differs from traditional product-costing methods.
2. Using activity-based costing, calculate the total cost for the following activity cost pools:
machining, assembly, material handling, and inspection. (Round to the nearest dollar) Then,
calculate the pool rate per unit of the appropriate cost driver fir each of the four activities.
3. Prepare a table showing for each product line the estimated 20x2 cost for each of the
following cost elements: direct material, direct labor, machining, assembly, material handling,
and inspection.(Round to the nearest dollar,)
4. Prepare a budgeted statement showing the gross margin for Whitestone Company for 20x2,
1/2
 using activity-based costing. The statement should show each product and a total for the
company. Be sure to include detailed calculations for die cost of goods manufactured and sold.
(Round each amount in the statement to the nearest dollar)

Whitestone Company produces two subassemblies JR 14 and RM 13

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subassemblies-jr-14-and-rm-13

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