answer quickly Henry Machinery Corp. manufactures two models of medical devices: Model 101 and Model 102. Below is the actual current production data for the company:Direct material unitsDirect labor hoursMachine hoursNumber of setupsNumber of devices producedMedel 101 Model 10297,00030,00026,00030016,000113,00040,00013,0006008,000The company has established the following activity centers, cost drivers, and estimated costs for the yearCost PoolEquipment maintenanceProduction setupTransportation costsCost driver*of machine hoursof setupst of units produoedCost$585,000$125,000S600,000Velume of cost driver39,00090024,000Calculate the total.manufacturing gverhend costs allocated to Model 192 (Round overhead rates to 2 decimal points).Seected Arewet 4783333Coneet Anewer O 478,334rswer range 24782-47830)

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Answered: Henry Machinery Corp. manufactures two…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 10E: Hercules Inc. manufactures elliptical exercise machines and treadmills. The products are produced in...

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Patterson Company produces wafers for integrated circuits. Data for the most recent year are provided: aCalculated using number of dies as the single unit-level driver. bCalculated by multiplying the consumption ratio of each product by the cost of each activity. Required: 1. Using the five most expensive activities, calculate the overhead cost assigned to each product. Assume that the costs of the other activities are assigned in proportion to the cost of the five activities. 2. Calculate the error relative to the fully specified ABC product cost and comment on the outcome. 3. What if activities 1, 2, 5, and 8 each had a cost of 650,000 and the remaining activities had a cost of 50,000? Calculate the cost assigned to Wafer A by a fully specified ABC system and then by an approximately relevant ABC approach. Comment on the implications for the approximately relevant approach.
Evans, Inc., has a unit-based costing system. Evanss Miami plant produces 10 different electronic products. The demand for each product is about the same. Although they differ in complexity, each product uses about the same labor time and materials. The plant has used direct labor hours for years to assign overhead to products. To help design engineers understand the assumed cost relationships, the Cost Accounting Department developed the following cost equation. (The equation describes the relationship between total manufacturing costs and direct labor hours; the equation is supported by a coefficient of determination of 60 percent.) Y=5,000,000+30X,whereX=directlaborhours The variable rate of 30 is broken down as follows: Because of competitive pressures, product engineering was given the charge to redesign products to reduce the total cost of manufacturing. Using the above cost relationships, product engineering adopted the strategy of redesigning to reduce direct labor content. As each design was completed, an engineering change order was cut, triggering a series of events such as design approval, vendor selection, bill of materials update, redrawing of schematic, test runs, changes in setup procedures, development of new inspection procedures, and so on. After one year of design changes, the normal volume of direct labor was reduced from 250,000 hours to 200,000 hours, with the same number of products being produced. Although each product differs in its labor content, the redesign efforts reduced the labor content for all products. On average, the labor content per unit of product dropped from 1.25 hours per unit to one hour per unit. Fixed overhead, however, increased from 5,000,000 to 6,600,000 per year. Suppose that a consultant was hired to explain the increase in fixed overhead costs. The consultants study revealed that the 30 per hour rate captured the unit-level variable costs; however, the cost behavior of other activities was quite different. For example, setting up equipment is a step-fixed cost, where each step is 2,000 setup hours, costing 90,000. The study also revealed that the cost of receiving goods is a function of the number of different components. This activity has a variable cost of 2,000 per component type and a fixed cost that follows a step-cost pattern. The step is defined by 20 components with a cost of 50,000 per step. Assume also that the consultant indicated that the design adopted by the engineers increased the demand for setups from 20,000 setup hours to 40,000 setup hours and the number of different components from 100 to 250. The demand for other non-unit-level activities remained unchanged. The consultant also recommended that management take a look at a rejected design for its products. This rejected design increased direct labor content from 250,000 hours to 260,000 hours, decreased the demand for setups from 20,000 hours to 10,000 hours, and decreased the demand for purchasing from 100 component types to 75 component types, while the demand for all other activities remained unchanged. Required: 1. Using normal volume, compute the manufacturing cost per labor hour before the year of design changes. What is the cost per unit of an average product? 2. Using normal volume after the one year of design changes, compute the manufacturing cost per hour. What is the cost per unit of an average product? 3. Before considering the consultants study, what do you think is the most likely explanation for the failure of the design changes to reduce manufacturing costs? Now use the information from the consultants study to explain the increase in the average cost per unit of product. What changes would you suggest to improve Evanss efforts to reduce costs? 4. Explain why the consultant recommended a second look at a rejected design. Provide computational support. What does this tell you about the strategic importance of cost management?
A manufacturing company has two service and two production departments. Human Resources and Machine Repair are the service departments. The production departments are Grinding and Polishing. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The human resources department services all departments of the company, and its costs are allocated using the numbers of employees within each department, while machine repair costs are allocable to Grinding and Polishing on the basis of machine hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.
Hercules Inc. manufactures elliptical exercise machines and treadmills. The products are produced in its Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows: The activity-base usage quantities and units produced for each product were as follows: Use the activity rate and usage information to determine the total activity cost and activity cost per unit for each product.
A manufacturing company has two service and two production departments. Building Maintenance and Factory Office are the service departments. The production departments are Assembly and Machining. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The building maintenance department services all departments of the company, and its costs are allocated using floor space occupied, while factory office costs are allocable to Assembly and Machining on the basis of direct labor hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.
Forner, Inc., manufactures and sells two products: Product Z1 and Product Z8. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Expected Activity Estimated Activity Overhead Activity Cost Pools Measures Cost Product Z1 Product Z8 Total Labor-related $ 124,400 6,000 DLHS 3,000 9,000 Machine setups setups 58,660 700 600 1,300 Order size MHs 917,480 3,800 3,000 6,800 $1,100,540 The activity rate for the Order Sıze activity cost pool under activity-based costing is closest to: Multiple Cholce $59.53 per MH $193.87 per MH $143.55 per MH $134.92 per MH
Flynn Industries has three activity cost pools and two products. It estimates production 2,000 units of Product BC113 and 1,000 of Product AD908. Having identified its activity cost pools and the cost drivers for each pool, Flynn accumulated the following data relative to those activity cost pools and cost drivers. Estimated Use of Annual Overhead Data Cost Drivers per Product Estimated Estimated Use of Cost Product Product Activity Cost Pools Cost Drivers Overhead Drivers per Activity ВС113 AD908 Machine setup Setups $16,400 41 20 21 Machining Machine hours 111,320 4,840 1,060 3,780 Packing Orders 28,800 450 170 280 Using the above data, do the following: Prepare a schedule showing the computations of the activity-based overhead rates per cost driver. Activity Estimated Estimated Use of Cost Activity-Based Overhead Rates Cost Overhead Drivers per Activity Pools Machine per setups setup setuj per machine Machining mach hours hr. per Packing orders orde $ %24 %24 %24 %24
Forner, Inc., manufactures and sells two products: Product Z1 and Product Z8. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Z1 Product Z8 Total Labor-related DLHs $ 112,190 600 2,000 2,600 Machine setups setups 40,440 500 700 1,200 Order size MHs 609,770 3,000 3,200 6,200 $ 762,400 The activity rate for the Order Size activity cost pool under activity-based costing is closest to: Multiple Choice $56.10 per MH $293.23 per MH $76.24 per MH $98.35 per MH
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Stampout Plastics produces different kinds of products, all in one manufacturing facility. They have identified four activities for their costing system: Materials management—allocated by number of purchase ordersChemical processing—allocated on metric tonsMolding—allocated on direct labor hoursPackaging—allocated by number of units produced The activity rates are as follows: Materials management $12.00 Per purchase order Chemical processing $7.50 Per metric ton Molding $24.00 Per direct labor hour Packaging $0.10 Per unit Engineering design shows that the order will require direct materials that cost $540; direct labor cost will be $90. The order will also require four purchase orders to be placed, use two metric tons of chemical base, and need eight direct labor hours. The size of the order is to produce 3,000 units of product. Calculate the total production of the order.
Buggy Company manufactures and sells two products: Product A1 and Product A2. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product A1 Product A2 Total Labour-related DLHs $250,000 5,000 4,000 9,000 Machine setups setups 138,040 800 600 1,400 General factory MHs 280,553 3,500 3,200 6,700 Total 668,593 What is the activity rate for the Machine Setups activity cost pool?
Bewig, Inc., manufactures and sells two products: Product E8 and Product R4. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product E8 Product R4 Total Labour-related DLHs $201,717 4,800 4,500 9,300 Machine setups setups 69,020 400 300 700 General factory MHs 140,553 3,300 3,000 6,300 $411,290 Bewig produces 10,000 of E8 and 15,000 of R4 annually. The overhead applied to each unit of Product E8 under activity-based costing is closest to: Question 11 options: 1) $3.94 2) $19.41 3) $41.13 4) $21.72

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