Activity-Based Cost… DOC PREVIEW

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Oklahoma State University, Oklahoma City • ACCT • ACCT 2203 •

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Hammer Company produces a variety of electronic equipment. One of its p
and the Regular. At the beginning of the year, the following data were prepar

Deluxe
Quantity produced and sold 20,000
Selling price per unit $ 1,000
Direct materials cost per unit $ 250
Direct labor cost per unit $ 300
 Activity
Setups
Machining
In addition, Name
the Number
Activity
Machine
following of
Driver
setups
hours
information Overhead
$ 2,000,000 Cost
8,000,000
was provided so that Deluxe
overhead 300
100,000
costs co
Engineering
based costing: Engineering hours $ 6,000,000 50,000
Packing Packing orders $ 500,000 20,000
$ 16,500,000

1. Calculate a rate for each activity by using the associated driver:

$4,000
Setups: $________________ per setup

$20
Machining: $________________ per machine hour

$40
Engineering: $________________ per engineering hour

$5
Packing: $________________ per packing order

2. Using the Activity-based Costing (ABC) assignment method how

$265.00
Deluxe Printer ________________ Regu

3. Calculate the product cost per unit for the:

$815.00
Deluxe Printer ________________ Regu

4. Assuming all product costs are variable, calculate the contributio

$185.00
Deluxe Printer ________________ Regu
 Chapter 4 Exam Review Problem #2 – Activity Based C

Lovelace Company produces only two products: reading glasses

normal cost system and overhead costs are currently allocated usin
direct labor hours. Outside cost consultants have recommended
costing to charge overhead to products.
The company expects to produce 3,000 reading glasses and 2,000
of the year, the following data were prepared for this plant:

Prescription Glasses
Quantity produced and sold 3,000
Selling price per unit $ 100.00
Direct Material (per unit) $ 15.00
Direct labor (per unit) $ 6.00
Direct labor hours 30,000

Estimated total factory overhead data for the year is as follows:

Activity Budgeted Overhead Reading Glas

Production setups $ 80,000
Material handling $ 70,000 1,0
Packaging and shipping $ 60,000 3,0
Total factory overhead $ 210,000
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