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    Required:: Cost Pool Overhead Costs Activity-Cost Driver

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    janeperdz
    The document describes two costing systems - traditional costing and activity-based costing (ABC) - used by Best Products Company which produces two products: YOLO and XOXO. It provides production information and overhead costs under each system and asks to calculate the total and per-unit costs reported for each product. It also presents two other problems involving calculating activity rates, assigning overhead costs, and determining product unit costs using ABC for different companies.

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    Required:: Cost Pool Overhead Costs Activity-Cost Driver

    Uploaded by

    janeperdz
    74 views3 pages
    The document describes two costing systems - traditional costing and activity-based costing (ABC) - used by Best Products Company which produces two products: YOLO and XOXO. It provides production information and overhead costs under each system and asks to calculate the total and per-unit costs reported for each product. It also presents two other problems involving calculating activity rates, assigning overhead costs, and determining product unit costs using ABC for different companies.

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    The document describes two costing systems - traditional costing and activity-based costing (ABC) - used by Best Products Company which produces two products: YOLO and XOXO. It provides production information and overhead costs under each system and asks to calculate the total and per-unit costs reported for each product. It also presents two other problems involving calculating activity rates, assigning overhead costs, and determining product unit costs using ABC for different companies.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    74 views3 pages

    Required:: Cost Pool Overhead Costs Activity-Cost Driver

    Uploaded by

    janeperdz
    The document describes two costing systems - traditional costing and activity-based costing (ABC) - used by Best Products Company which produces two products: YOLO and XOXO. It provides production information and overhead costs under each system and asks to calculate the total and per-unit costs reported for each product. It also presents two other problems involving calculating activity rates, assigning overhead costs, and determining product unit costs using ABC for different companies.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    PROBLEM

    Comparison of ABC and Traditional Costing; Two Products. Best Products Company
    produces two products, YOLO and XOXO, and uses a costing system in which all
    overhead is accumulated in a single cost pool and allocated based on machine hours.
    Best Products management has decided to implement ABC because a cost study has
    revealed significant amounts of overhead cost related to setup activity and design
    activity. The number of setups and the number of design hours will be the activity
    drivers for the two new cost pools, and machine hours will continue as the base for
    allocating the remaining overhead. Selected information follows for Best Product
    Company's most recent year of operations:

    YOLO XOXO. Total


    Units produced....................................................... 500 15,500 16,000

    Direct material cost:


    Per unit.......................................................... P 20 P 20
    Total...............................................................P 100,000 P310,000 P410,000

    Machine hours........................................................ 3,000 47,000 50,000


    Direct labor cost..................................................... P50,000 P350,000. P400,000
    Setups.................................................................... 120 80 200
    Design hours.......................................................... 6,000 4,000 10,000

    Overhead:
    Setup-related.................................................... P250,000
    Design-related.................................................. 350,000
    Other................................................................. 900,000
    Total overhead.................................................. P1,500,000

    Required:

    (1) Calculate the total and per-unit costs reported for the two products by the existing
    costing system.
    (2) Calculate the total and per-unit costs reported for the two products by the ABC
    system.

    Problem 2. Maria Potters manufactures two sizes of ceramic paperweights, regular and
    jumbo. The following information applies to their expectations for the planning period:

    Cost Pool Overhead Costs Activity-cost driver


    Materials handling P 45,000 90,000 orders
    Machine maintenance P300,000 15,000 maintenance hours
    Setups P270,000 45,000 setups
    Inspections P105,000 21,000 inspections
    Total support costs $720,000

    Production Estimates
    Production units:
    Regular = 8,000,000 units
    Jumbo = 16,000,000 units
    Machine-hours = 200,000 mh
    Labor-hours = 400,000 dlh

    Maria Potters uses an ABC system and assigns overhead costs based on the overhead
    activity information provided above.

    1) The materials handling activity-cost driver rate is: _______


    2) The inspections activity-cost driver rate is: _________
    3) During October, Maria produced 700,000 regular ceramic paperweights and Maria’
    production manager counted 2,000 orders; 1,000 maintenance-hours; 2,000 setups;
    and 2,000 inspections for the regular product line. For October, Maria’ controller
    assigned ________ indirect costs to the regular product line.

    JLS Savings and Loan

    JLS Savings and Loan had the following activities, traceable costs, and
    physical flow of driver units:

    Traceable Physical flow of


    Activities Costs Driver Units

    Open new accounts P50,000 1,000 accounts


    Process deposits 36,000 400,000 deposits
    Process withdrawals 15,000 200,000 withdrawals
    Process loan applications 27,000 900 applications

    The above activities are used by the Davao City branch and the Kidapawan
    branch:

    Davao City Kidapawan

    New accounts 200 400


    Deposits 40,000 20,000
    Withdrawals 15,000 18,000
    Loan applications 100 160

    1. What is the cost per driver unit for new account activity?

    2. What is the cost per driver unit for the deposit activity?

    3. What is the cost per driver unit for the withdrawal activity?

    4. What is the cost per driver unit for the loan application activity?

    5. How much of the loan application cost will be assigned to the Davao City branch?

    6. How much of the deposit cost will be assigned to the Kidapawan branch?
    7. How much of the new account cost will be assigned to the Kidapawan branch?

    JL Company uses activity-based costing. The company produces two products: coats
    and hats. The annual production and sales volume of coats is 8,000 units and of hats is
    6,000 units. There are three activity cost pools with the following expected activities
    and estimated total costs:

    Activity Estimate Expected Expected


    Cost Pool d Activity Activity
    Cost Coats Hats Total
    Activity 1 P20,000 100 400 500
    Activity 2 P37,000 800 200 1,000
    Activity 3 P91,200 800 3,000 3,800

    1. Using ABC, how much is the approximate cost per unit of coats?_______

    2. Using ABC, how much is the approximate cost per unit of hats? _________

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