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Chapter 19: Q 36PGA-1 (page 1077)

Question:Blanchette Plant Service completed a special landscaping job for Kerry Company. Blanchette uses ABC and has the following predetermined overhead allocation rates:

Activity Predetermined

Allocation Base Overhead Allocation Rate

Designing Number of designs \( 290 per design

Planting Number of plants \) 20 per plant

The Kerry job included \(750 in plants; \)1,300 in direct labor; one design; and 30 plants.

Requirements

1. What is the total cost of the Kerry job?

Short Answer

Expert verified

Answer

Total cost of Kerry job: $2,190

Step by step solution

01

Total overhead cost

Designcost=No.ofdesigns×Predeterminedallocationoverheadrate=$1×$290=$290Plantingcost=No.ofplants×Predeterminedallocationoverheadrate=$30×$20=$600Totaloverheadcost=Designcost+Planningcost=$290 +$600=$890

02

Total cost of Kerry job

Totalcost=Directlabourcost+Totaloverheadcost=$1,300 +$890=$2,190

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Most popular questions from this chapter

The Oakman Company (see Short Exercise S19-1) has refined its allocation system by separating manufacturing overhead costs into two cost pools—one for each department. The estimated costs for the Mixing Department, \(510,000, will be allocated based on direct labor hours, and the estimated direct labor hours for the year are 170,000. The estimated costs for the Packaging Department, \)300,000, will be allocated based on machine hours, and the estimated machine hours for the year are 40,000. In October, the company incurred 38,000 direct labor hours in the Mixing Department and 10,000 machine hours in the Packaging Department.

Requirements

2. Determine the total amount of overhead allocated in October.

The following information is provided for Orbit Antenna Corp., which manufactures two products: Lo-Gain antennas and Hi-Gain antennas for use in remote areas.

Activity Cost Allocation Base

Setup \( 58,000 Number of setups

Machine maintenance 30,000 Number of machine hours

Total indirect manufacturing costs \) 88,000

Lo-Gain Hi-Gain Total

Direct labor hours 1,200 3,800 5,000

Number of setups 40 40 80

Number of machine hours 3,000 2,000 5,000

Orbit Antenna plans to produce 125 Lo-Gain antennas and 225 Hi-Gain antennas.

Requirements

2. Compute the ABC indirect manufacturing cost per unit for each product.

Jaunkas Corp. manufactures mid-fi and hi-fi stereo receivers. The following data have been summarized:

Mid-Fi Hi-Fi

Direct materials cost per unit \( 400 \) 1,800

Direct labor cost per unit 600 400

Indirect manufacturing cost per unit ? ?

Indirect manufacturing cost information includes the following:

Activity

Predetermined

Overhead

Allocation Rate

Mid-Fi

Hi-Fi

Setup

\( 1,400 per setup

36 setups

36 setups

Inspection

\) 700 per inspection hour

35 inspection hours

20 inspection hours

Machine maintenance

$ 13 per machine hour

1,900 machine hours

1,150 machine hours

The company plans to manufacture 125 units of the mid-fi receivers and 250 units of the hi-fi receivers. Calculate the product cost per unit for both products using activity-based costing.

Explain the difference between the target price and target cost.

Harcourt Pharmaceuticals manufactures an over-the-counter allergy medication. The company sells both large commercial containers of 1,000 capsules to health care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels. The following information has been developed to determine if an activity-based costing system would be beneficial:

Activity Estimated Estimated Quantity

Indirect Cost Allocation Base of Allocation Base

Materials handling \( 96,000 Number of kilos 24,000 kilos

Packaging 210,000 Number of machine hours 3,000 hours

Quality assurance 114,000 Number of samples 1,900 samples

Total indirect costs \) 420,000

Other production information includes the following:

Commercial Containers Travel Packs

Units produced 2,800 containers 51,000 packs

Weight in kilos 9,800 5,100

Machine hours 1,960 510

Number of samples 560 765

Requirements

4. Compare the indirect activity-based costs per unit to the indirect costs per unit from the traditional system. How have the unit costs changed? Explain why the costs changed as they did.
See all solutions

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