Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 5, Problem 24E
Geneva, Inc., makes two products, X and Y, that require allocation of indirect
The total cost of purchasing and receiving parts used in manufacturing is $60,000. The company uses a
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Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $24.82 per unit, while product B has been assigned $13.58 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information:
Cost Pools
Activity Costs
Cost Drivers
Activity Driver Consumption
Machine setup
$ 158,000
Setup hours
2,000
Materials handling
112,000
Pounds of materials
16,000
Electric power
25,000
Kilowatt-hours
25,000
The following cost information pertains to the production of A and B, just two of Hakara's many products:
A
B
Number of units produced
5,000
10,000
Direct materials cost
$ 32,000
$ 41,000
Direct labor cost
$ 41,000
$ 38,000
Number of setup hours
100
200
Pounds of materials used
1,000
1,000
Kilowatt-hours
2,000
4,000
Required:
1. Use…
Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system, product A has been assigned overhead of $35.29 per unit, while product B has been assigned $8.25 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information:
Cost Pools
Activity Costs
Cost Drivers
Activity Driver Consumption
Machine setup
$
261,000
Setup hours
3,000
Materials handling
153,000
Pounds of materials
17,000
Electric power
38,000
Kilowatt-hours
38,000
The following cost information pertains to the production of A and B, just two of Hakara's many products:
A
B
Number of units produced
4,000
20,000
Direct materials cost
$
37,000
$
27,000
Direct labor cost
$
41,000
$
40,000
Number of setup hours
200
200
Pounds of materials used
1,000…
Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation
system, product A has been assigned overhead of $23.18 per unit, while product B has been assigned $9.84 per unit. Management
feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and
cost driver information:
Cost Pools
Activity Costs.
$426,000
Machine setup
Materials handling
171,000
54,000
Electric power
The following cost information pertains to the production of A and B, just two of Hakara's many products:
Number of units produced
Direct materials cost
Direct labor cost
Number of setup hours
Pounds of materials used
Kilowatt-hours
Product A
Product B
A
5,000
$ 37,000
$ 24,000
100
1,000
2,000
X Answer is not complete.
Cost per Unit
$
18.22 X
Cost Drivers
Setup hours
Pounds of materials.
Kilowatt-hours
Required:
1. Use activity-based costing to determine a unit cost for each product.…
Chapter 5 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 5 - What is cost measurement? Cost accumulation? What...Ch. 5 - Why is actual costing rarely used for product...Ch. 5 - Explain the differences between job-order costing...Ch. 5 - What are some differences between a manual...Ch. 5 - Prob. 5DQCh. 5 - How do firms collect job-related information on...Ch. 5 - Explain the role of activity drivers in assigning...Ch. 5 - Define the following terms: expected actual...Ch. 5 - Why would some prefer normal activity to expected...Ch. 5 - When using normal costing, how are jobs charged...
Ch. 5 - Wilson Company has a predetermined overhead rate...Ch. 5 - Why are the accounting requirements for job-order...Ch. 5 - Explain the difference between normal cost of...Ch. 5 - Amber Company produces custom framing. For one...Ch. 5 - Amber Company produces custom framing. For one...Ch. 5 - Naranjo Company designs industrial prototypes for...Ch. 5 - Naranjo Company designs industrial prototypes for...Ch. 5 - Heitger Company is a job-order costing firm that...Ch. 5 - Frieling Company installs granite countertops in...Ch. 5 - Frieling Company installs granite countertops in...Ch. 5 - Prob. 6ECh. 5 - Vince Melders, of EcoScape Company, designs and...Ch. 5 - Refer to the data in Exercise 5.7. Vince Melders,...Ch. 5 - Reggie Wilmore has just started a new...Ch. 5 - Reggie Wilmore has just started a new...Ch. 5 - During March, Aragon Company worked on three jobs....Ch. 5 - Job Cost On April 1, Sangvikar Company had the...Ch. 5 - Job Cost On April 1, Sangvikar Company had the...Ch. 5 - On August 1, Cairle Companys work-in-process...Ch. 5 - On August 1, Cairle Companys work-in-process...Ch. 5 - Ehrling Brothers Company makes jobs to customer...Ch. 5 - During August, Skyler Company worked on three...Ch. 5 - Feldspar Company uses an ABC system to apply...Ch. 5 - Kapoor Company uses job-order costing. During...Ch. 5 - Salazar Company is a job-order costing firm that...Ch. 5 - Lorrimer Company has a job-order cost system. The...Ch. 5 - CleanCom Company specializes in cleaning...Ch. 5 - Prob. 23ECh. 5 - Geneva, Inc., makes two products, X and Y, that...Ch. 5 - Prob. 25ECh. 5 - During May, the following transactions were...Ch. 5 - Firenza Company manufactures specialty tools to...Ch. 5 - Prob. 28PCh. 5 - Cherise Ortega, marketing manager for Romer...Ch. 5 - Lieu Company is a specialty print shop. Usually,...Ch. 5 - Warrens Sporting Goods Store sells a variety of...Ch. 5 - Sutton Construction Inc. is a privately held,...Ch. 5 - Dr. Alyx Hemmings is employed by Mesa Dental. Mesa...Ch. 5 - Prob. 34P
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