Managerial Accounting - Prof.

Beg Free work cells

Chapter 5: ABC Answer cells

Quinnipiac Padfolio Club makes two products (Padfolios and Business Cards) for students to use during interview season. The company has two
production departments (Forming and Assembly) and operates at capacity. The controller has asked you to compare plant-wide, department, and
activity- based cost allocation.

Direct Material and Direct Labor is incurred in both production departments (Forming & Assembly) and is directly traced to the two product lines
(Padfolios & Business Cards). There are also two types of overhead (Setup & Supervision) incurred in the departments. Overhead costs need to be
allocated to the two product lines so the Quinnipiac Padfolio Club can calculate the costs of each product line.

Budgeted information for the year ended December 31, 2017 is as follows:

Forming Department Padfolios Business Cards Total

Direct Materials $ 25,000 $ 24,000 $ 49,000
Direct Manufacturing Labor $ 41,000 $ 17,000 $ 58,000
Overhead Costs
Setup $ 22,500
Supervision $ 20,500

Assembly Department Padfolios Business Cards Total

Direct Materials $ 4,500 $ 20,000 $ 24,500
Direct Manufacturing Labor $ 17,500 $ 22,000 $ 39,500
Overhead Costs
Setup $ 50,000
Supervision $ 24,000

Other information about the departments' activities follows:

Setup costs in each department vary with the number of batches processed in each department. The budgeted number of batches for each product
line in each department is as follows:

Setup Batches Padfolios Business Cards Total

Forming Department 28 120 148
Assembly Department 43 90 133

Supervision Costs: Vary with direct manufacturing labor costs in each department.

Calculate the total budgeted cost of each product line (Padfolios vs. Business Cards) based on a single plant-wide overhead rate,
1 if total overhead is allocated based on total direct costs.

(Direct costs should be traced to the products as identified above. Indirect costs should be allocated to the products based on a
single overhead allocation rate.)

Budgeted OH Pool OH Pool Amount Alloc Base Allocation Rate Alloc Base
Overhead Rate Description Amount Description
OH Rate 1 $ 0.6842

Total Costs Assigned Padfolios Business Cards Total

Direct Materials $ 25,000 $ 24,000 $ 49,000
Direct Manufacturing Materials $ 41,000 $ 17,000 $ 58,000
$ 4,500 $ 20,000 $ 24,500

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Chapter 5: ABC Answer cells

$ 17,500 $ 22,000 $ 39,500

Total Direct Costs $ 88,000 $ 83,000 $ 171,000
setup
supervision

Total Overhead Costs $ 60,211 $ 56,789 $ 117,000

Total Manufacturing Costs $ 148,211 $ 139,789 $ 288,000

Calculate the budgeted cost of each product line (Padfolios vs. Business Cards) based on departmental overhead rates, where:

2 (a) Forming department overhead costs are allocated based on direct manufacturing labor costs of the forming department, and

(b) Assembly department overhead costs are allocated based on total direct costs of the assembly department.

(Direct costs should be traced to the products as identified above. Indirect costs should be allocated to the products based on
two overhead allocation rates -- one for each department.)

Budgeted OH Pool Alloc Base Alloc Base

Overhead Rate Description OH Pool Amount Amount Allocation Rate Description
OH Rate 1 $ 0.7414
OH Rate 2 $ 1.1563

Total Costs Assigned Padfolios Business Cards Total

$ 29,500 $ 24,000
$ 58,500

Total Direct Costs $ 88,000 $ 83,000 $ 171,000

$ 30,397 $ 12,603
$ 25,438 $ 48,563

Total Overhead Costs $ 55,834 $ 61,166 $ 117,000

Total Manufacturing Costs $ 143,834 $ 144,166 $ 288,000

Calculate the budgeted cost of each product line (Padfolios vs. Business Cards) if Quinnipiac Padfolio Club allocates overhead
3 costs in each department using activity-based costing. (i.e. Each type of overhead in each department is allocated using the
relevant activity in the department.)

(Direct costs should be traced to the products as identified above. Indirect costs should be allocated to the products based on
four overhead allocation rates -- one for each activity.)

Budgeted OH Pool Alloc Base Alloc Base

Overhead Rate Description OH Pool Amount Amount Allocation Rate Description
OH Rate 1 $ 152.0270
OH Rate 2 $ 0.3534
OH Rate 3 $ 375.9398
OH Rate 4 $ 0.6076

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Total Costs Assigned Padfolios Business Cards Total

Total Direct Costs $ 88,000 $ 83,000 $ 171,000

$ 4,257 $ 18,243
$ 14,491 $ 6,009
$ 16,165 $ 33,835
$ 10,633 $ 13,367
Total Overhead Costs $ 45,546 $ 71,454 $ 117,000
Total Manufacturing Costs $ 133,546 $ 154,454 $ 288,000

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