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Determining Activity Cost

Determining Activity Cost

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"1) Determine the activity-cost-driver rate for packaging costs.
2) Using the ABC system, for the sugar cookie, compute the estimated overhead costs per thousand cookies.
3) Using the ABC system, for the sugar cookie, compute the estimated operating profit per thousand cookies.
4) Using a traditional system (with direct labor hours as the overhead allocation base) for the sugar cookie, compute the estimated overhead costs per thousand cookies.
5) Using a traditional system (with direct labor hours as the overhead allocation base) for the sugar cookie, compute the estimated operating profit per thousand cookies.
6) Explain the difference between the profits obtained from the traditional system and the ABC system. Which system provides a better estimate of profitability? Why?
"
"1) Determine the activity-cost-driver rate for packaging costs.
2) Using the ABC system, for the sugar cookie, compute the estimated overhead costs per thousand cookies.
3) Using the ABC system, for the sugar cookie, compute the estimated operating profit per thousand cookies.
4) Using a traditional system (with direct labor hours as the overhead allocation base) for the sugar cookie, compute the estimated overhead costs per thousand cookies.
5) Using a traditional system (with direct labor hours as the overhead allocation base) for the sugar cookie, compute the estimated operating profit per thousand cookies.
6) Explain the difference between the profits obtained from the traditional system and the ABC system. Which system provides a better estimate of profitability? Why?
"

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Accounting

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14 $0.02 $0.000 $360.000 $0.15 $0.20 $0. Sugar. the information listed below is available: Projected sales in units PER UNIT data: Selling price Direct materials Direct labor Hours per 1000-unit batch: Direct labor hours Oven hours Packaging hours Macaroon 500.classof1. .Sub: Accounting Determining Activity Cost Question: Topic: Cost Accounting Aunt Ethel's Fancy Cookie Company manufactures and sells three flavors of cookies: Macaroon.000 $150.000 cookies based on the size of the ovens and cookie molds owned by the company.02 2 1 0.5 1 1 0.75 $0. The batch size for the cookies is limited to 1.5 Total overhead costs and activity levels for the year are estimated as follows: Activity Direct labor Oven Packaging Overhead costs $210.000 Activity levels 2.000 Butter cream 600.900 Oven Hours 950 Packing Hours Questions: 1) Determine the activity-cost-driver rate for packaging costs.400 Hours 1.5 1 1 0.com/homework-help/accounting *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades. www. and Butter cream.80 $0.000 Sugar 800. Based on budgetary projections.60 $0.04 $0.

6) Explain the difference between the profits obtained from the traditional system and the ABC system.classof1. Which system provides a better estimate of profitability? Why? www. for the sugar cookie. compute the estimated overhead costs per thousand cookies. compute the estimated operating profit per thousand cookies. . compute the estimated operating profit per thousand cookies. 3) Using the ABC system.com/homework-help/accounting *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades.Sub: Accounting Topic: Cost Accounting 2) Using the ABC system. 5) Using a traditional system (with direct labor hours as the overhead allocation base) for the sugar cookie. compute the estimated overhead costs per thousand cookies. 4) Using a traditional system (with direct labor hours as the overhead allocation base) for the sugar cookie. for the sugar cookie.

000 2.000 $150.80 $0. .14 $0.classof1.com/homework-help/accounting *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades.000 Activity levels Computation of activity-cost-driver rate for packaging costs www.02 $0.60 $0.000 cream 600.5 1 1 0.04 $0.15 $0.5 $0.5 Overhead costs Direct labor Oven $210.900 Hours Oven Hours Packing Packaging 1) $360.000 950 Hours 1 1 0.75 $0.Sub: Accounting Solution: Actual Values: Topic: Cost Accounting Butter Macaroon Sugar Projected sales in units PER UNIT data: Selling price Direct materials Direct labor Hours per 1000-unit batch: Direct labor hours Oven hours Packaging hours Activity 2 1 0.000 800.02 500.400 1.20 $0.

95 $360.95 $350.155.84 cream Total Computation of estimated operating profit per thousand cookies using ABC System Butter Macaroon Sugar cream Total www.com/homework-help/accounting *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades.47 $355.95 $378.400 1.47 $443.50 $78.000 $150.47 $355.92 $568.Sub: Accounting Total Packing Cost (a) Total Packing Hours (b) Cost driver rate for packing Cost (c = a/b) $378. .00 $78.000 950 Topic: Cost Accounting Computation of estimated overhead costs per thousand 2) cookies Butter Macaroon Sugar Over Head cost based on Direct labor hours Overhead cost based on Oven hours Overhead cost based on Packaging hours Total Overhead cost Working Note: Computation of Overhead cost rate based on the activity Activity Overhead costs Direct labor Oven Packaging 3) $210.26 $175.95 $189.50 $78.42 $1.95 $87.50 $78.00 $236.classof1.900 950 Overhead rate $87.95 $87.000 Activity levels 2.92 $189.42 $189.000 $360.

74 Computation of estimated overhead costs per thousand cookies using traditional 4) system Butter Macaroon Sugar Direct Labor hours (a) Overhead rate per direct Labor hours (b) Total Overhead cost (c = a X b) Working Note: Computation of overhead rate per direct labor hours Activity Overhead costs Direct labor Oven Packaging Total Overhead Cost $210.000 $2.150 $490 $80 $1.000 $750 $150 $20 $355.42 $116.000 $300 $600 $300 $300 $300 $300 $1.08 1.200 2 1 cream 1 Total 4 www.com/homework-help/accounting *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades.58 1.000 $720.c .000 $360.Sub: Accounting Topic: Cost Accounting No of cookies (a) Total sales Revenue (b) Direct materials (c ) Direct labor (d) Overhead cost (e) Operating Profit (f = b . .d .000 $800 $200 $40 $443.92 $84.08 3.classof1.000 $600 $140 $20 $355.e) 1.92 $224.000 $150.155 $424.

200 $380.Sub: Accounting Total Direct Labor Hours Overhead rate per hours 2.000 $600 $140 $20 $300.00 ($40.00 ($55.c .00 ($55.92) $140.74 $116.400 $300 Topic: Cost Accounting Computation of estimated operating profit per thousand cookies using Traditional 5) System Butter Macaroon Sugar cream Total No of cookies (a) Total sales Revenue (b) Direct materials (c ) Direct labor (d) Overhead cost (e) Operating Profit (f = b .classof1.00 1.58 $224.d .e) 6) 1.000 $750 $150 $20 $300.00) $156.00 3.08 cream $84. .150 $490 $80 $1.00) 1.00 $280.00 $44.58 $280.com/homework-help/accounting *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades.000 $2.000 $800 $200 $40 $600.92) $380.00 Comparative statement of operating Profit Butter Macaroon Sugar Operating Profit using ABC System Operating Profit using Traditional System Difference in profit ($40.00 $140.08 Total $424.74 Comparative statement of overhead cost per thousand cookies Butter Macaroon Sugar cream Total www.

while under Activity based costing system provides allocation of overhead cost on the basis of the activity used in the production. Under the traditional system the total overhead cost is allocated on the basis of direct labor hours. direct labor. Product costs are the familiar direct materials.00 ($44. It does not give direct linkage of activity used in the production and overhead cost.00 $55.92 $1.com/homework-help/accounting *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for submitting the same in lieu of their academic submissions for grades. www.200. and factory overhead. There is the difference of $156. of allocation of overhead cost.26 $300.92 $355. general.Sub: Accounting Overhead cost using ABC System Overhead System Difference in profit cost using Traditional $600. The traditional system give a single allocation base as direct labor hours or machine hours. Because traditional costing methods divide costs into product costs and period costs.74 per thousand cookies. This difference is due to the allocation of overhead cost.00 ($156. The period costs include selling.00 $55.74) There is a difference in the total operating profit of $44. . While the activity based gives direct linkage of activity used in the production with the overhead cost.42 Topic: Cost Accounting $355.155. and administrative items and are charged against income in the period incurred.92 $1.58. Total Overhead cost for Macaroon under ABC is $443. Activity Based costing system gives better estimate of profit.classof1.92 $300. The same is the case in Sugar and Butter Cream Cookies also.58) $443.42 and under Traditional system $600.

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