ACC 560 WEEK 3 CHAPTER 4 HOMEWORK complete solutions correct answers key

ACC 560 WEEK 3 CHAPTER 4 HOMEWORK complete solutions correct answers key

BE4-7 Spud, Inc. a manufacturer of gourmet potato chips, employs activity-based costing. The budgeted data for each of the activity cost pools is provided below for the year 2017.

Activity Cost Pools                   Estimated Overhead                 Expected Use of Cost Drivers per Activity

Ordering and receiving                                $84,000                      12,000 orders

Food processing                              480,000                      60,000 machine hours

Packaging                                      1,760,000                              440,000 labor hours

For 2017, the company had 11,000 orders and used 50,000 machine hours, and labor hours totaled 500,000. What is the total overhead applied?

Classify activities as value- or non-value-added.

BE4-12 Spin Cycle Architecture uses three activity pools to apply overhead to its projects. Each activity has a cost driver used to allocate the overhead costs to the projects. The activities and related overhead costs are as follows: initial concept formation $40,000, design $300,000, and construction oversight $100,000. The cost drivers and expected use are as follows.

Activities                               Cost Drivers                           Expected Use of Cost Drivers per Activity

Initial concept formation        Number of project changes                       20

Design                                           Square feet                                                150,000

Construction oversight                     Number of months                                    100

(a)  Compute the predetermined overhead rate for each activity.

(b)  Classify each of these activities as unit-level, batch-level, product-level, or facility-level.

E4-1 Saddle Inc. has two types of handbags: standard and custom. The controller has decided to use a plant wide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company's operations.

                                Standard                    Custom

Direct labor costs       $50,000           $100,000

Machine hours                     1,000                         1,000

Setup hours               100                           400

Total estimated overhead costs are $240,000. Overhead cost allocated to the machining activity cost pool is $140,000, and $100,000 is allocated to the machine setup activity cost pool.

Instructions:

a.     Compute the overhead rate using the traditional (plant wide) approach.

b.    Compute the overhead rates using the activity-based costing approach.

c.     Determine the difference in allocation between the two approaches.

E4-6 Santana Corporation manufactures snowmobiles in its Blue Mountain, Wisconsin, plant. The following costs are budgeted for the first quarter's operations.

Machine setup, indirect materials                     $            4,000

Inspections                                                                16,000

Tests                                                                         4,000

Insurance, plant                                                          110,000

Engineering design                                                                   140,000

Depreciation, machinery                                              520,000

Machine setup, indirect labor                                        20,000

Property taxes                                                            29,000

Oil, heating                                                                19,000

Electricity, plant lighting                                               21,000

Engineering prototypes                                                60,000

Depreciation, plant                                                      210,000

Electricity, machinery                                                   36,000

Machine maintenance wages                                        19,000

Instructions

Classify the above costs of Santana Corporation into activity cost pools using the following: engineering, machinery, machine setup, quality control, factory utilities, and maintenance. Next, identify a cost driver that may be used to assign each cost pool to each line of snowmobiles.

E4-14 Venus Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year.

                                           Commercial                            Residential

Revenues                                         $300,000                     $480,000 

Direct materials costs      $ 30,000                                 $  50,000

Direct labor costs              100,000                                 300,000