15 Dec Determine if the overhead allocated to the product relates to a single plantwide overhead rate method, multiple production department factory overhead rate method, or activity-based costing method
Determine if the overhead allocated to the product relates to a single plantwide overhead rate method, multiple production department factory overhead rate method, or activity-based costing method.
Product A: $210 allocated by number of setups, $325 allocated by number of purchase orders, and $220 allocated by number of engineering hours.
Product B: $284 allocated by direct labor in Department Z and $590 allocated by machine hours in Department Y.
Product C: $475 allocated by machine hours.
2.
To determine selling and administrative expenses to allocate to products, Wake Coffee Co. uses activity-based costing. The company breaks this expense into customer return processing and shipping and handling, with total estimated costs of $6,000 and $7,000, respectively. The company expects to receive 200 returns and prepare 350 special shipments.
a. Calculate the activity rate for customer return processing and shipping and handling.
b. The Deluxe Coffee receives 57 returns and requires 210 special shipments. Determine the amount of selling and administrative expenses related to these activities that will be allocated to the product.
3.
The total cost of production for the last four quarters for Moore’s Mowers is shown below. Use the high-low method to determine the variable cost per unit and the fixed cost.
Total Cost Units Produced
Quarter 1 $51,000 2,000
Quarter 2 56,400 2,300
Quarter 3 49,200 1,900
Quarter 4 53,700 2,150
4.
Calculate the variable cost per unit and the fixed cost using the high-low method for the production information given.
Total Cost Units Produced
August $46,800 5,600
September 58,200 7,500
October 42,600 4,900
November 53,880 6,780
5.
Finnegan’s management is deciding between the absorption costing and variable costing method. The company would like to treat the fixed and variable overhead costs the same, as a product cost. Which method should the company use?
6.
Use the information shown to calculate Finnegan’s manufacturing margin, contribution margin, and income from operations. The company uses a variable costing system. Assume that the company sold all units produced.
Sales $890,000
Direct materials 54,000
Direct labor 120,000
Variable overhead 18,000
Fixed overhead 23,500
Variable selling and administrative 12,400
Fixed selling and administrative 35,750
