1. The Klamath Corp. produces two products, saws and drills. Three activities are used in their manufacture. These activities and their associated costs and bases are as follows:
|
Activity
|
Budgeted Costs
|
Activity Base
|
|
Machining
|
$100,000
|
Machine hours
|
|
Assembly
|
$400,000
|
Labor hours
|
|
Setup
|
$60,000
|
number of setups
|
|
Total OH costs
|
$560,000
|
|
|
Activity base
|
Saws
|
Drills
|
Total
|
|
machine hours
|
6,000
|
4,000
|
10,000
|
|
labor hours
|
7,000
|
13,000
|
20,000
|
|
number of setups
|
11
|
4
|
15
|
| |
|
|
|
|
Units produced
|
500
|
600
|
|
Requirements:
Determine the activity rate for each activity.
|
Activity
|
Budgeted Costs
|
Activity Base
|
Activity Rate
|
|
Machining
|
$100,000
|
|
|
|
Assembly
|
$400,000
|
|
|
|
Setup
|
$60,000
|
|
|
|
Total OH costs
|
$560,000
|
|
|
b) Determine the overhead cost per unit for each product using the activity rates calculated above.
| |
Saws
|
Drills
|
|
OH cost per unit:
|
|
|
Supporting calculations:
c) Determine the single plantwide overhead rate if the company uses machine hours as the base for allocating overhead to jobs. Show your calculations.
d) Determine the overhead cost per unit for each product using the single overhead rate calculated above.
| |
Saws
|
Drills
|
|
OH cost per unit:
|
|
|
Supporting calculations:
e) Why are the costs per unit different using the single plantwide rate and the activity based costing methods? Explain in detail and refer to the activity volumes in the introduction to this problem.
2. Accuracy Testing Company manufactures custom testing equipment. They produce their products in small quantities to customer specifications. They have adopted a job cost accounting system. Answer each of the questions below.
Required. During the month of January, the materials requisitions and direct labor time tickets showed the following information:
|
Date
|
Job Number
|
Materials Used
|
|
1/1
|
101
|
$13,200
|
|
1/6
|
102
|
37,250
|
|
1/15
|
102
|
8,700
|
|
1/22
|
103
|
23,750
|
|
Date
|
Job Number
|
DL Hours
|
|
1/2
|
101
|
65
|
|
1/9
|
101
|
17
|
|
1/16
|
102
|
36
|
|
1/16
|
103
|
18
|
|
1/30
|
103
|
29
|
Compute the costs incurred for the month on each job. Use the DL average rate of $21 per hour and the overhead allocation rate of $14 per DL hour. Show your work. Remember that the cost of any job is DM + DL + OH.
Job 101, total costs = ___________________
If the company prices their products at 140% of cost, what will job 101 be sold for?