Managerial Accounting ACCT 2200 Accounting Information for Decisions. 3rd edition.

Ingram, Albright, Balwin, Hill Selected Homework problems and solutions.

CH.M5 E5-5 (p.M121) (see book for complete problem) Auto Detail Company Traditional: $175 per direct labor hour Activity Based Cost: $120.00 per direct labor hour $ 345.00 per machine changeover $ 100.00 per inspection Per production run Direct labor hours Batch size # of inspections Vinyl striping 10 hours 180 Rolls 0 inspections Metallic striping 8 hours 65 Rolls 3 inspections

A. Calculate overhead cost per roll to make in vinyl and metallic using the traditional method. *Vinyl* 10 Hours X $175.00/hour = $1750.00 total to make 180 rolls $1750.00 divided by 180 rolls = $9.72 per roll of vinyl *Metallic* 8 hours X $175.00/ hour = $1400.00 total to make 65 rolls $1400.00 divided by 65 rolls = $21.54 per roll of metallic B. Calculate overhead cost per roll to make vinyl and metallic using the activity based cost method. Vinyl Overhead Costs Labor cost- 10 hours X $120.00= $1200.00 Setup $345.00 Inspections- 0 X 100.00 = $0.00 $1545.00 $1545.00 divided by 180 rolls = $8.58 cost per roll of vinyl Metallic Overhead Costs Labor cost- 8 hours X $120.00 = $960.00 Setup $345.00 Inspections – 3 X 100.00 = $300.00 $1605.00 $1605.00 divided by 65 rolls = $24.69 cost per roll of metallic

CH. M5 E5-6 (p.M121) (see book for complete problem) Company uses 3 activity pools to assign costs to products. Each activity pool has a unique cost driver to apply overhead costs to products. Activity Materials handling Machine Setup Machine Operations Cost Driver # of Batches # of Setups Machine Hrs. Est. Overhead Costs $60,000.00 $150,000.00 $500,000.00 Est. Actvity Level 500 batches 300 Setups 4,000 machine hours

-Calculate the predetermined rate for each activity. Then classify each activity as unit level, batch level, product level, or facility level. *Predetermined overhead rate = Est. Overhead divided by activity level *Materials Handling POR= $60,000.00 divided by 500 batches POR=120 Batch Level *Machine Setup POR= $150,000.00 divided by 300 setups POR=500 Batch Level *Machine Operations POR= $500,000.00 divided by 4,000 machine hours POR= 125 Unit Level CH M5 E-5-16 (p.M121) Gonzalez Manufacturing had the following activity during the 1st quarter this year: Actual Level of Activity Activity Pool Cost/Activity Product A Product B Product C Product D Machine setups $50.00/setup 500 setups 600 800 650 Inspection $15.00/inspection 3165 inspections 2155 780 3000 Receiving $100.00/receipt 420 Receipts 175 655 500 Factory $20/machine hr. 19,250 hours 14300 21500 15950 # of units 20,000 units 17500 25000 22500 *Determine the total overhead cost charged to each product for the quarter. Then, calculate the overhead cost per unit. -Product A Machine setups $50.00 X 500 setups = 25,000.00 Inspections $15.00 X 3165 inspections = 47,475.00 Receiving $100.00 X 420 receipts = 42,000.00 Factory $20.00 X 19,250 hours = 385,000 Overhead Costs 499,475.00 $499,475.00 divided by 20,000 units = $24.97 per unit of product A

-Product B Machine Setups $50.00 X 600 setups = 30,000.00 Inspections $15.00 X 2155 inspections = 32,325.00 Receiving $100.00 X 175 Receipts = 17,500.00 Factory $20.00 X 14300 hours = 286,000.00 _____ Overhead Costs 365,825.00 $365,825.00 divided by 17,500 units = $20.90 per unit of product B -Product C Machine Setups $50.00 X 800 setups = 40,000.00 Inspections $15.00 X 780 inspections = 11,700.00 Receiving $100 X 655 receipts = 65,500.00 Factory $20.00 X 21500 hours = 430,000.00 Overhead Costs 547,200.00 $547,200.00 divided by 25,000 units = $21.89 per unit of Product C -Product D Machine Setups $50.00 X 650 setups = 32,500.00 Inspections $15.00 X 3000 inspections = 45,000.00 Receiving $100.00 X 500 receipts = 50,000.00 Factory $20.00 X 15950 hours = 319,000.00 Overhead Costs 446,500.00 $446,500.00 divided by 22,500 units = $19.84 per unit of Product D

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