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Managerial Accounting, 3 Edition, by Weygandt, Kieso, and Kimmel
Solving Managerial Accounting Problems Using Microsoft Excel for Windows by Rex A Schildhouse
\$1,600
Problem P4-2A, Jacobson Electronics manufactures two large-screen television models: the Royale which sells for
and a new model, the Majestic, which sells for
\$1,300
The production cost computed per unit under traditional costing for
each model is 2005 was as follows.
Royale
Majestic
Direct materials
\$700
\$420
Direct labor(\$20 per hour)
120
100
228
190
Total per unit cost
\$1,048
\$710
In 2005, Jacobson manufactured
25,000
units of the Royale and
10,000
units of the Majestic. The overhead
rate of
\$38
per direct labor hour was determined by dividing total expected manufacturing overhead of
\$7,600,000
by the direct labor hours 200,000 for the two models.
Under traditional costing, the gross profit on the models was: Royale
\$552
or (\$1,600 - \$1,048) and Majestic
\$590 or (\$1,300 - \$710)
Because of this difference, management is considering phasing out the Royale model and increasing the
Majestic model.
Before finalizing its decision, management asks Jacobson's controller to prepare an analysis using activity-based costing (ABC). The
controller accumulates the following information about overhead for the year ended December 31, 2005.

Activity
Machine setups
Machining
Quality control

Cost Driver
Number of orders
Number of setups
Machine hours
Number of inspections

The cost drivers used for each product were:
Cost Driver
Purchase orders
Machine setups
Machine hours
Inspections

Royale
15,000
5,000
75,000
9,000

Estimated
\$1,200,000
900,000
4,800,000
700,000

Expected
Use of
Cost
Drivers
40,000
18,000
120,000
28,000

Majestic
25,000
13,000
45,000
19,000

Total
40,000
18,000
120,000
28,000

ActivityBased
Rate
\$30
50
40
25

Instructions:
(a) Assign the total 2005 manufacturing overhead costs to the two products using activity-based costing (ABC).
Royale
Majestic
Drivers
Cost
Drivers
Cost
Total
Rate
Used
Assigned
Used
Label
Amount
Amount
Amount
Amount
Amount
Formula
Label
Amount
Amount
Amount
Amount
Amount
Formula
Label
Amount
Amount
Amount
Amount
Amount
Formula
Label
Amount
Amount
Amount
Amount
Amount
Formula
Total assigned costs
Formula
Formula
Formula
Units produced
Amount
Amount
Cost per unit
Formula
Formula
(b) What was the cost per unit and gross profit of each model using ABC costing?

Label
Label
Label
Total cost per unit

Royale
Amount
Amount
Amount
Formula

Majestic
Amount
Amount
Amount
Formula

(c) Are management's future plans for the two models sound? Explain the block below.

FileName: 254200918.xls.ms_office, Tab: Problem P4-2A, Page 1 of 2, 12/8/2014, 9:30 PM

The print area is defined to fit onto 8 1/2" X 11" sheets in portrait or landscape mode as required. Type the due date of your problem into cell "I5".3651 X 5. The gray filled cells define the perimeter of the problem and the print area. This will be copied by formula to the rest of the pages as required. Insert the title in the cell where "TITLE" appears on the template.434. page breaks are preset and formulas are set to copy the header into the remaining pages. This will be copied by formula to the rest of the pages as required. In these cells. Insert the account number where "ACCT #" appears on the template during posting. Type the instructor's name into cell "D6". The problem is identified for you in cell "B7".631) where the word TEXT appears. Type your name into the cell "D5". Enter a string like: (\$259. Type the course identifier into cell "I6". Insert the journal reference where "JOURN #" appears on the template during posting. Negative values may be shown as (\$400) vice -\$400. A formula may be placed in Enter a number like 914 to signify units or gallons where the word "NUMBER" appears. Write a formula into cells where the word "FORMULA" appears. Place the amount in the cell where the word "AMOUNT" appears on the template. an amount calculated outside of Place the explanation for the entry in the cell where the word "EXPLANATION" appears on the template. Striking the "F1" key or following the path "Windows>Excel Help" will invoke the Office Assistant and bring up one of several help menus. In "DATE" cells enter the date in any of several formats and Excel will format it correctly. This will be copied by formula to the rest of the pages as required. . The problem is formatted for whole dollars with comma separations (no cents) except where required. The display may have "Freeze Pane" invoked so column titles remain visible during data entry. If more than one page is preformatted into the problem. This will be copied by formula to the rest of the pages as required.Instructions for the Microsoft Excel Templates Detail and information on Excel is contained within the manual.417 X 12 months) + (0. Place the proper account title in the cell where the word "ACCOUNT" appears on the template.