Excel Applications for Accounting Principles
4th Edition
ISBN: 9781111581565
Author: Gaylord N. Smith
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 20, Problem 1R
Bumblebee Mobiles manufactures a line of cell phones. The management has identified the following overhead costs and related cost drivers for the coming year.
The following were incurred in manufacturing two of their cell phones, Bubble and Burst, during the first quarter.
REQUIREMENT
Review the worksheet called ABC that follows these requirements. You have been asked to determine the cost of each product using an activity-based cost system. Note that the problem information is already entered into the Data Section of the ABC worksheet.
Expert Solution & Answer
To determine
Ascertain the cost of each product of Company B in the worksheet by using the activity based cost system.
Explanation of Solution
(Figure 1)
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Mema Company makes motorcycles. Management wants to estimate overhead costs to plan its operations. A recent trade publication revealed that overhead costs tend to vary with machine hours. To check this, they collected the following data for the past 12 months.
(See the picture for the table)
Compute for the:
1. If the plant is planning to operate at a level of 200 machine hours next period, what would be the estimated overhead costs?
Fisher Fixtures manufactures three types of lighting fixtures, with model names of Silver, Gold, and Platinum. It applies all indirect costs according to an annual predetermined rate based on direct labor-hours. The plant controller has recommended that the company switch to an activity-based costing system. The controller's staff prepared the following cost estimates for next year (year 2) for the recommended cost drivers.
Activity
Recommended Cost Driver
Estimated Cost
Estimated Cost Driver Activity
Purchasing material
Number of purchase orders
$ 121,200
240
purchase orders
Receiving material
Direct materials cost
225,600
$ 2,820,000
Setting up equipment
Number of production runs
219,360
120
runs
Machine depreciation and maintenance
Machine-hours
75,540
15,108
hours
Ensuring regulatory compliance
Number of inspections
437,400
54
inspections
Shipping
Number of units shipped
1,058,400
588,000
units
Total estimated cost
$ 2,137,500
In addition, management…
Fisher Fixtures manufactures three types of lighting fixtures, with model names of Silver, Gold, and Platinum. It applies all indirect costs according to an annual predetermined rate based on direct labor-hours. The plant controller has recommended that the company switch to an activity-based costing system. The controller's staff prepared the following cost estimates for next year (year 2) for the recommended cost drivers.
Activity
Recommended Cost Driver
Estimated Cost
Estimated Cost Driver Activity
Purchasing material
Number of purchase orders
$ 138,000
240
purchase orders
Receiving material
Direct materials cost
248,000
$ 3,100,000
Setting up equipment
Number of production runs
241,200
120
runs
Machine depreciation and maintenance
Machine-hours
83,800
16,760
hours
Ensuring regulatory compliance
Number of inspections
475,200
54
inspections
Shipping
Number of units shipped
1,108,800
616,000
units
Total estimated cost
$ 2,295,000
In addition, management…
Chapter 20 Solutions
Excel Applications for Accounting Principles
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year: Silven produces two models of cell phones with the following expected activity demands: 1. Determine the total overhead assigned to each product using the four activity drivers. 2. Determine the total overhead assigned to each model using the two most expensive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs. 3. Using ABC as the benchmark, calculate the percentage error and comment on the accuracy of the reduced system. Explain why this approach may be desirable.arrow_forwardPlease use the information from this problem for these calculations. After grouping cost pools and estimating overhead and activities, Box Springs determined these rates: Box Springs estimates there will be four orders in the next year, and those jobs will involve: What is the total cost of the jobs?arrow_forwardPlease use the information from this problem for these calculations. After grouping cost pools and estimating overhead and activities, Box Springs determined these rates: It estimates there will be five orders in the next year, and those jobs will involve: What is the total cost of the jobs?arrow_forward
- Big Mikes, a large hardware store, has gathered data on its overhead activities and associated costs for the past 10 months. Nizam Sanjay, a member of the controllers department, believes that overhead activities and costs should be classified into groups that have the same driver. He has decided that unloading incoming goods, counting goods, and inspecting goods can be grouped together as a more general receiving activity, since these three activities are all driven by the number of receiving orders. The 10 months of data shown below have been gathered for the receiving activity. Required: 1. Prepare a scattergraph, plotting the receiving costs against the number of purchase orders. Use the vertical axis for costs and the horizontal axis for orders. 2. Select two points that make the best fit, and compute a cost formula for receiving costs. 3. Using the high-low method, prepare a cost formula for the receiving activity. 4. Using the method of least squares, prepare a cost formula for the receiving activity. What is the coefficient of determination?arrow_forwardFirenza Company manufactures specialty tools to customer order. Budgeted overhead for the coming year is: Previously, Sanjay Bhatt, Firenza Companys controller, had applied overhead on the basis of machine hours. Expected machine hours for the coming year are 50,000. Sanjay has been reading about activity-based costing, and he wonders whether or not it might offer some advantages to his company. He decided that appropriate drivers for overhead activities are purchase orders for purchasing, number of setups for setup cost, engineering hours for engineering cost, and machine hours for other. Budgeted amounts for these drivers are 5,000 purchase orders, 500 setups, and 2,500 engineering hours. Sanjay has been asked to prepare bids for two jobs with the following information: The typical bid price includes a 40 percent markup over full manufacturing cost. Required: 1. Calculate a plantwide rate for Firenza Company based on machine hours. What is the bid price of each job using this rate? 2. Calculate activity rates for the four overhead activities. What is the bid price of each job using these rates? 3. Which bids are more accurate? Why?arrow_forwardFisher Fixtures manufactures three types of lighting fixtures, with model names of Silver, Gold, and Platinum. It applies all indirect costs according to an annual predetermined rate based on direct labor-hours. The plant controller has recommended that the company switch to an activity-based costing system. The controller's staff prepared the following cost estimates for next year (year 2) for the recommended cost drivers. Activity Recommended Cost Driver Estimated Cost Estimated Cost Driver Activity Purchasing material Number of purchase orders $ 130,800 240 purchase orders Receiving material Direct materials cost 238,400 $ 2,980,000 Setting up equipment Number of production runs 231,840 120 runs Machine depreciation and maintenance Machine-hours 80,260 16,052 hours Ensuring regulatory compliance Number of inspections 459,000 54 inspections Shipping Number of units shipped 1,087,200 604,000 units Total estimated cost $ 2,227,500 In addition, management…arrow_forward
- The managers of Sandusky Inc. have decided to use the month of January to determine the cost of producing their widget for the year. This will help determine proper product pricing and is important for control purposes. Using the data from January, the managers can determine the costs associated with material and labor. However, fixed indirect costs must still be determined. Management intends to use the prior year’s data to determine overhead costs. It is assumed that management will allocate an equal amount of estimated costs each month. Is this an appropriate decision by management? Should January be used as the reference point for the whole year?arrow_forwardMema Company makes motorcycles. Management wants to estimate overhead costs to plan its operations. A recent trade publication revealed that overhead costs tend to vary with machine hours. To check this, they collected the following data for the past 12 months. (See the picture for the table) Compute for the: Use the High-low method to estimate the fixed and variable portion of overhead costs based on machine hours.arrow_forwardSuppose the smartphone manufacturer Peony Electronics provides the following information for its costs last month (in millions): (Click the icon to view the costs.) Read the requirements. Requirements 1, 2 and 3. Classify each of these costs according to its place in the value chain. Within the production category, break the costs down further into three subcategories: Direct Materials, Direct Labor, and Manufacturing Overhead. Then calculate the total cost for each value chain category. (Enter amounts in millions. If an input field is not used in the table, leave the input field empty; do not enter a zero.) Cost Delivery expense Salaries of salespeople Chipset Exterior case for phone Assembly-line workers' wages Technical support hotline Depreciation on plant and equipment Rearrange production process 1-800 (toll-free) line for customer orders Scientists' salaries Total costs Cost R and D $ 14 Peony Electronics Value Chain Cost Classification Direct Design Materials LA 60 5 $…arrow_forward
- Fisher Fixtures manufactures three types of lighting fixtures, with model names of Silver, Gold, and Platinum. It applies all indirect costs according to an annual predetermined rate based on direct labor-hours. The plant controller has recommended that the company switch to an activity-based costing system. The controller's staff prepared the following cost estimates for next year (year 2) for the recommended cost drivers. Activity Purchasing material Receiving material Setting up equipment Machine depreciation and maintenance Ensuring regulatory compliance Shipping Total estimated cost Number of units produced Direct labor-hours In addition, management estimated 45,000 direct labor-hours for year 2. Assume that the following cost-driver volumes occurred in January, year 2: Number of purchase orders Direct materials costs Number of production runs Machine-hours Number of inspections Units shipped Recommended Cost Driver Number of purchase orders Direct materials cost Number of…arrow_forwardHoustin Partners provides management consulting services to government and corporate clients. Houstin has two support departments-administrative services (AS) and information systems (IS)-and two operating departments-government consulting (GOVT) and corporate consulting (CORP). For the first quarter of 2017, Houstin's cost records indicate the following: E (Click the icon to view the cost records.) Read the requirements. ..... intermediary calculations and round your final answers balances.) Data table SUPPORT OPERATING AS IS GOVT CORP Total Budgeted overhead costs before any interdepartment cost allocations Support work supplied by AS (budgeted head count) Support work supplied by IS (budgeted computer time) $ 390,000 $ 2,100,000 $ 7,500,000 $ 12,420,000 $ 22,410,000 25% 45% 30% 100% 10% 36% 54% 100% Requirements Print Done 1. Allocate the two support departments' costs to the two operating departments using the following methods: а. Direct method b. Step-down method (Allocate AS…arrow_forwardSparkle Corporation manufactures and sells two types of decorative lamps, Knox and Ayer. The following data are available for the year 2020. Machine setup-hours is the only driver of manufacturing overhead costs. Sparkle has a set up capacity of 2,220 hours. (Click the icon to view the information.) Calculate the manufacturing overhead costs budget (label it Schedule 5). Schedule 5: Manufacturing Overhead Costs Budget for the Year Ending December 31, 2020 Machine Setup Overhead Costs Total manufacturing overhead costs Data table 1. Quantity of lamps to be produced 2. Number of lamps to be produced per batch 3. Setup time per batch Variable cost = $70 per setup-hour Fixed cost = - $79,000 Knox 21,000 lamps 50 lamps/batch 3 hours/batch Ayer 12,000 lamps 50 lamps/batch 4 hours/batch Xarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Excel Applications for Accounting Principles
Accounting
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY