Tutorial Chapter 8

EXERCISE 8-8 Activity Measure

Ming Corporation

Activity Activity Example of activity Measure

Classification
a. direct Labor worker assemble a Unit level Number of DL hours
product
b. Product are designed by engineer Product level Number of product designed
c. Equipment is setup Batch level Number of setup
d. Machines are used to shape and Unit level Number of machines hours
cut materials
e. Monthly bills are sent out to Customer level Number of bills
regular customers
f. materials are moved from the Batch level Number of batch
receiving dock to production lines
g. All completed units are inspected Unit level Number of inspected unit
to defects

EXERCISE 8-9 Computing ABC product Costs

i. Machine setup = $ 72,000

400
= $180 per Setup

ii. Special processing = $ 200,000

5,000
= $ 40 per Machine hours

iii. General factory = $ 816,000

24,000
= $ 34 per DL hours
 EXERCISE 8-10 First Stage Allocations

Processing Processing
Opening deposit & other Other
accounts withdrawal customer activity Total
s transaction
Teller wages $ 8,000 $ 104,000 $ 32,000 $ 16,000 $ 160,000
Assistant branch
manager salary $11,250 $3,750 $ 22,500 $37,500 $ 75,000
Branch manager
salary $ 4,000 -------- $ 8,000 $ 68,000 $ 80,000
Total $ 23,250 $ 107,750 $ 62,500 $ 121,500 $ 315,00

EXERCISE 8-11 Computing and Interpreting Activity Rates

Activity Cost Pools Total Cost Total Activity Activity Rate

Opening accounts $ 23,250 500 $ 46.50
Processing deposits &
Withdrawals $ 107,750 100,000 $ 1,08
Processing other customer
transactions $ 62,500 5,000 $ 12.50

EXERCISE 8-12 Second – Stage allocation to an Order

Overhead Cost Assigned To The Other

Activity Cost Pools Activity Rate Activity ABC Cost
Order size R 16.85 200 order R 3,370
Customer Orders R 320.00 -- 0
Product Testing R 89.00 4 hours R 356
Selling R 1090.00 2 sales R 2,180
Total R 5,906

Note: The currency in South Africa is the Rand, denoted here by R

 EXERCISE 8-18 Comprehensive Activity – Based Costing Exercise

1.

Distribution Of Resource Consumption

Across Activity Cost Pools
Volume Order Customer Other Total
Related Related support
Wages & salaries $ 120,000 $ 90,000 $ 60,000 $ 30,000 $ 300,000
Other Overhead
cost $ 30,000 $ 10,000 $ 20,000 $ 40,000 $ 100,000
Total $ 150,000 $ 100,000 $ 80,000 $ 70,000 $ 400,000

2.

Activity Cost Pools Total Cost Total Activity Activity Rate

Volume Related $ 150,000 20,000 DLHs $ 7.50 / DLHs
Order Related $ 100,000 400 Order $ 250 / Order
Customer Support $ 80,000 200 Customer $ 400 /Customer
Other $ 70,000 Not Applicable Not Appliczble

3.

Overhead Cost For The Other

Activity Cost Pools Activity Rate Activity ABC Cost
Volume Related $ 7.50 / DLHs 2 DLHs $ 15.00
Order Related $ 250 / Order 10 Unit $ 2500
Customer Support $ 400 / Customer -- 0
Other -- -- 0
Total $ 2515.00