Attachment # 00010572 - BUSI5233.Minor_2_-_Process_Costing_Methodology_(1)_.xlsx
BUSI5233.Minor_2_-_Process_Costing_Methodology_(1)_.xlsx (50.22 KB)
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1.?Total costsValue Conversion costs Materials Transferred outCost accounted forCost Reconciliation Schedule Started into productionCosts to be accounted for Equivalent units (b) Total cost(a)Unit costsTotalConversion CostsMaterialsCosts Total units Transferred outUnits accounted forUnits to be accounted forPhysical UnitsQuantitiesEquivalent UnitsProduction Cost ReportNOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .Instructions(Round calculation of cost per equivalent units to 3 decimal points.)(c )(b)(a)$60,000. Show the impact of this change on the calculation of equivalent units, unit cost, and on the cost reconciliation schedule.Assume that 25 kayaks remained in ending work in process and conversion costs incurred during the period changed to 42,500. After you have completed the requirements of CD3, consider this additional question. Work in Process, April 30 Work in process, April 1 Work in process, April 30For the Month ended April 30, 2017Fabrication DepartmentCURRENT DESIGNSComplete a production report for April 2017 for the Fabrication Department using the weighted-average method.Department and that the conversion costs for the month were $39,600. A review of the accounting records for April showed that materials with a cost of $17,500 had been requisitioned by the Fabrication the conversion costs added to them. During April, 72 boats were started. At the end of the month, the 35 kayaks in the ending inventory had 20% of the materials and 40% of costs. The costs of this inventory had been calculated to be $8,400 in materials and $9,000 in conversion costs.estimated that about 80% of the material costs had been added to these boats, which were about 50% complete with respect to the conversion At the beginning of April, Current Designs had 30 kayaks in process in the Fabrication Department. Rick Thrune, the production manager,components are added in the Finishing Department.removed with a vacuum process, and the upper shell and lower shell are removed from the molds and assembled. The seat, hatch, and other several steps as employees carefully place layers of Kevlar® in a mold and then use resin to fuse together the layers. The excess resin is Building a kayak using the composite method is a very labor-intensive process. In the Fabrication Department, the kayaks go through CD3 -Excel Tutorial Unit costs (a) ÷ (b)Redo instructions (a) to (c).activity cost pool is$150,000 and $135,000 is allocated to the machine setup activity cost pool.Assume that total estimated overhead costs are $285,000. Overhead cost allocated to the machining After you have completed E4-1, consider the additional question.Total OH allocation400 Setup Hr x OH rate100 Setup Hr x OH rateMachine setup:1,000 MH x OH rateMachining:CustomStandardActivity-based costing$100,000 x POH ratePOH rate$50,000 x Traditional costing:per setup hour=per machine hourActivity-based overhead rates Setup hoursMachine setupMachine hoursMachiningEstimated overheadCost driversActivity cost poolsof direct labor cost ValueDirect labor costsPredetermined overhead rate(a) (c) Determine the difference in allocation between the two approaches.(b) Compute the overhead rates using the activity-based costing approach.(a) Compute the overhead rate using the traditional (plantwide) approach.$140,000 and $100,000 is allocated to the machine setup activity cost pool.Total estimated overhead costs are $240,000. Overhead cost allocated to the machining activity cost pool isSetup hourssetup. Presented below is information related to the company's operations.the results would differ if this system was used. Two activity cost pools were developed: machining and machineoverhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see howSaddle Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide E4-1 Assign overhead using traditional costing and ABC respectively. Redo instsructions (a) to (c ) and round cost and gross profit per unit to two decimal points. Also assume that the number of inspections used by Royale and Majestic models changed to 12,000 and 16,0001. Assume that the purchase orders used by Royale and Majestic changed to 19,000 and 21,000 respectively. After you have completed P4-2A, consider the additional question.(c) Are management's future plans for the two models sound? Explain.Gross profit per unitCost per unitSales price per unit Total cost per unitManufacturing overheadDirect laborDirect materialsMajesticRoyale(b) The cost per unit and gross profit of each model under ABC costing were: Cost per unit (a) ÷ (b) Units produced (b) Total assigned costs (a)Inspections @$25Machine hours @$40Machine setups @$50Purchase order@$30OverheadCost AssignedDrivers UsedOverhead Rate(a) The allocation of total manufacturing overhead using activity-based costing is as follows:(b) What was the cost per unit and gross profit of each model using ABC costing? determine the overhead cost per unit.(a) Assign the total 2017 manufacturing overhead costs to the two products using activity-based costing (ABC) and InspectionsMachine setupsPurchase ordersCost Drivers The cost drivers used for each product were:$25/inspectionNumber of inspectionsQuality control$40/hour$50/setupNumber of setups$30/orderNumber of ordersPurchasingOverhead Ratesof Cost Drivers Cost PoolsActivity-BasedEstimated Use EstimatedActivitycosting (ABC). The controller accumulates the following information about overhead for the year ended December 31, 2017. Before finalizing its decision, management asks Schultz's controller to prepare an analysis using activity-basedthe production of the Majestic model.($1,300 - $710). Because of this difference, management is considering phasing out the Royale model and increasing Under traditional costing, the gross profit on the models was Royale 552 ($1,600 - $1,048) and Majestic $590total direct labor hours (200,000) for the two models. $38 per direct labor hour was determined by dividing total expected manufacturing overhead of $7,600,000 by the In 2017, Schultz manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate ofTotal per unit costManufacturing overhead ($38 per DLH)Direct labor ($20 per hours)Traditional Costingfor each model in 2017 as follows.a new model, the Majestic, which sells for $1,300. The production cost computed per unit under traditional costingSchultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $1,600 and P4-2A Assign overhead to products using ABC and evaluate decision Redo instruction (c) and round cost assigned /unit to two decimal points.1. Assume that the number of prototypes created for composite kayaks and rotomolded kayaks changed to 8 and 4 respectively.After you have completed CD4, consider the additional question.Which of the three methods do you think Current Designs should use? Why?(d)(a) ÷ (b)Cost assigned/unitNumber of units(b)Total Cost (a)Directly assignedTotal amount allocatedCuring timeSupervisionMoldsPrototypesDesignExpected Use of DriversActivity Cost PoolsRotomoldedCompositeday/employeemoldprototypemodelActivity-Based OH RatesEstimated Use of Cost DriversEstimated OverheadWhat amount of overhead should be assigned to each composite kayak and rotomolded kayak using the activity-based costing method?(c)Cost assigned per unitNumber of units based on direct labor costsRemaining amount allocated OH rate (a) ÷ (b) Rotomolded Composite Direct labor cost (b) Total OH costs (a)_Determine the amount of overhead that should be assigned to each unit of each product using direct labor dollars as an allocation basis. to each product lineRemaining amount allocated 50%assigned to each of the units in each of the units in each line.Determine the total amount to be assigned to the composite kayak line and the rotomolded kayak line, and the amount to be (d) Which of the three methods do you think Current Designs should use? Why? should be assigned to each rotomolded kayak using this method? What amount of overhead should be assigned to each composite kayak using this method? What amount of overheadNumber of days of curing time Curing timeNumber of employees Supervising production kayaksNumber of molds Creating molds for kayaksNumber of prototypes Creating and test prototypesNumber of models Designing new modelsRotomolded KayaksComposite KayaksDriver Amount for lines using the activity-based costing approach.(c) Activity-based costing requires a cost driver for each cost pool. Use the following information to assign the costs to the product line using this method. dollars as the allocation basis. Then, determine the amount of overhead that should be assigned to each unit of each product oven and the vacuum line have been assigned directly to the product lines, allocate the remaining costs using direct labor (b) Another method of allocating overhead is to use direct labor dollars as an allocation basis. Remembering that the costs of the rotomolded kayak line, and the amount to be assigned to each of the units in each line. and vacuum line have been directly assigned, determine the total amount to be assigned to the composite kayak line and the and other employees work on the rotomolded kayaks. Using this information and remembering that the cost of operating the oven Diane knows that about 50% of the area of the plant and 50% of the employees work on the composite kayaks, and the remaining space the number of employees working on each type of kayak or the amount of factory space used for the production of each type of kayak. (a) One method of allocating overhead would allocate the common costs to each product line by using a allocation basis such asand $286,000 in direct labor costs to produce 4,000 rotomolded kayaks each year.For purpose of this analysis, assume that Current Designs uses $234,000 in direct labor costs to produce 1,000 composite kayaks with the other costs.the vacuum line for the composite kayaks can be directly assigned to each of these products lines and do not need to be allocated As Diane examines the data, she decides that the cost of operating the oven for the rotomolded kayaks and the cost of operating the building) costs are related to the space required in the production process; many of these processes to finish before the next step in Curing time :(the time that is needed for the chemicalSupervising production employeesOperating the vacuum line for the composite kayaksOperating oven for the rotomolded kayaksCreating molds for kayaksCreating and testing prototypesDesigning new modelsCostActivities Diane has decided to use the following activities and costs to evaluate the methods of assigning overhead.complex that its costs are greater than its benefits.ensure that costs are appropriately assigned to the company's products. At the same time, the system that is used must not be socontroller, Diane Buswell, is now evaluating several different methods of assigning overhead to these products. It is important tovery labor-intensive, and rotomolded kayaks, which require less labor but employ more expensive equipment. Current Design'sAs you learned in the previous chapters, Current Designs has two main product lines - composite kayaks, which are handmade andCD4 - Excel Tutorial(a) to (c). Round overhead rates to two decimal points.Setting up machines and Assembly changed to $260,000 and $320,000 respectively. Redo instructionAssume that total estimated overhead costs changed to $850,000 and the estimated overhead forAfter you have completed E4-4, consider the additional question.What do you believe Hermann should do? Total cost assignedInspectionAssemblingSetting up machinesAssignedRatesCost Driver/UnitActivity Cost PoolABC OHxExpected Use ofTruck WheelsCar Wheels/inspection/labor hour/setupRate÷Estimated OHExpected Use Total OH assignedOverhead rate / direct labor hourDirect labor hoursTruck wheelsCar wheelsOverhead assigned:OH rate/DLHTotal direct labor hoursTotal estimated overheadTotal Direct labor hoursDirect labor hours for truck wheelsDirect labor hours for car wheels(d) What do you believe Hermann should do?TruckCarExpected Use of Cost Drivers per Product costing system, given the following information.(c) Compute the cost that is assigned to the car wheels and truck wheels product lines using an activity-based Compute the activity-based overhead rates for these three cost pools.1,200 inspections70,000 labor hours1,000 setups the following three activity cost pools and related cost drivers to better understand these costs. of the overhead costs relate to the truck wheels product line because of its complexity. He therefore develops(b) Hermann is not satisfied with the traditional method of allocating overhead because he believes that most is used to allocate overhead costs.(a) Compute the overhead cost assigned to the car wheels and truck wheels, assuming that direct labor hoursTotal estimated overhead costs for the two product lines are $770,000.Direct labor hours per wheelEstimated wheels producedassign to each product line, the controller, Robert Hermann, has developed the following information.Altex Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead toE4-4 - Assign overhead using traditional costing and ABC
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