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Connect Managerial Accounting Homework Chapter 4

Q1. Laval produces lamps and home lighting fixtures. Its most popular product is a brushed aluminum desk lamp. This lamp is made from components shaped in the fabricating department and assembled in the assembly department. Information related to the 31,000 desk lamps produced annually follows.

Direct materials	$280,000
Direct labor
Fabricating department (7,500 DLH × $24 per DLH)	$180,000
Assembly department (15,600 DLH × $22 per DLH)	$343,200
Machine hours
Fabricating department	14,800 MH
Assembly department	20,150 MH

Expected overhead cost and related data for the two production departments follow.

	Fabricating	Assembly
Direct labor hours	160,000 DLH	270,000 DLH
Machine hours	159,000 MH	131,000 MH
Overhead cost	$380,000	$435,000

Required
1. Determine the plantwide overhead rate for Laval using direct labor hours as a base.

2. Determine the total manufacturing cost per unit for the aluminum desk lamp using the plantwide overhead rate.

3. Compute departmental overhead rates based on machine hours in the fabricating department and direct labor hours in the assembly department.

4. Use departmental overhead rates from requirement 3 to determine the total manufacturing cost per unit for the aluminum desk lamps.

Q2. Way Cool produces two different models of air conditioners. The company produces the mechanical systems in its components department. The mechanical systems are combined with the housing assembly in its finishing department. The activities, costs, and drivers associated with these two manufacturing processes and the production support process follow. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and round “Cost per unit and OH rate” answers to 2 decimal places.)

Process	Activity	Overhead Cost	Driver	Quantity
Components	Changeover	$452,000	Number of batches	870
	Machining	300,800	Machine hours	7,620
	Setups	226,000	Number of setups	120
		$978,800
Finishing	Welding	$181,800	Welding hours	4,800
	Inspecting	234,000	Number of inspections	770
	Rework	61,000	Rework orders	250
		$476,800
Support	Purchasing	$137,000	Purchase orders	488
	Providing space	31,250	Number of units	4,500
	Providing utilities	60,240	Number of units	4,500
		$228,490

Additional production information concerning its two product lines follows.

	Model 145	Model 212
Units produced	1,500	3,000
Welding hours	2,600	2,200
Batches	435	435
Number of inspections	460	310
Machine hours	2,270	5,350
Setups	60	60
Rework orders	160	90
Purchase orders	325	163

Required:

Q3. Way Cool produces two different models of air conditioners. The company produces the mechanical systems in its components department. The mechanical systems are combined with the housing assembly in its finishing department. The activities, costs, and drivers associated with these two manufacturing processes and the production support process follow.

Process	Activity	Overhead Cost	Driver	Quantity
Components	Changeover	$464,000	Number of batches	730
	Machining	308,000	Machine hours	8,350
	Setups	229,000	Number of setups	200
		$1,001,000
Finishing	Welding	$186,000	Welding hours	6,000
	Inspecting	222,000	Number of inspections	830
	Rework	61,000	Rework orders	240
		$469,000
Support	Purchasing	$133,000	Purchase orders	489
	Providing space	33,000	Number of units	4,860
	Providing utilities	67,000	Number of units	4,860
		$233,000

Additional production information concerning its two product lines follows.

	Model 145	Model 212
Units produced	1,800	3,060
Welding hours	2,200	3,800
Batches	365	365
Number of inspections	460	370
Machine hours	3,050	5,300
Setups	100	100
Rework orders	140	100
Purchase orders	326	163

Required:
1. Determine departmental overhead rates and compute the overhead cost per unit for each product line. Base your overhead assignment for the components department on machine hours. Use welding hours to assign overhead costs to the finishing department. Assign costs to the support department based on number of purchase orders.

2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $210 for Model 145 and $190 for Model 212.

3. If the market price for Model 145 is $1,925 and the market price for Model 212 is $320, determine the profit or loss per unit for each model.

Q4. Way Cool produces two different models of air conditioners. The company produces the mechanical systems in its components department. The mechanical systems are combined with the housing assembly in its finishing department. The activities, costs, and drivers associated with these two manufacturing processes and the production support process follow.

Process	Activity	Overhead Cost	Driver	Quantity
Components	Changeover	$546,750	Number of batches	810
	Machining	349,454	Machine hours	7,630
	Setups	376,000	Number of setups	200
		$1,272,204
Finishing	Welding	$345,280	Welding hours	5,200
	Inspecting	282,750	Number of inspections	870
	Rework	51,700	Rework orders	220
		$679,730
Support	Purchasing	$170,940	Purchase orders	518
	Providing space	32,000	Number of units	5,100
	Providing utilities	63,370	Number of units	5,100
		$266,310

Additional production information concerning its two product lines follows.

	Model 145	Model 212
Units produced	1,700	3,400
Welding hours	1,400	3,800
Batches	405	405
Number of inspections	490	380
Machine hours	2,350	5,280
Setups	100	100
Rework orders	170	50
Purchase orders	345	173

Required:
1. Using ABC, compute the overhead cost per unit for each product line.

2. Determine the total cost per unit for each product line if the direct labor and direct materials costs per unit are $220 for Model 145 and $114 for Model 212.

3. If the market price for Model 145 is $812.90 and the market price for Model 212 is $470.67, determine the profit or loss per unit for each model.

Q5. Consider the following data for two products of Gitano Manufacturing. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations and “OH rate and cost per unit” answers to 2 decimal places.)

	Product A	Product B
Number of units produced	13,000 units	1,900 units
Direct labor cost (@ $31 per DLH)	0.18 DLH per unit	0.23 DLH per unit
Direct materials cost	$ 1.70 per unit	$ 2.90 per unit

 

Activity	Overhead costs
Machine setup	$128,707
Materials handling	58,000
Quality control inspections	66,000
	$252,707

Based on your results in part 4, should the profit or loss per unit for each product influence company strategy? Yes

Required:

Q6. Cardiff and Delp is an architectural firm that provides services for residential construction projects. The following data pertain to a recent reporting period.

	Activities	Costs
Design department
Client consultation	1,400 contact hours	$196,000
Drawings	1,400 design hours	81,200
Modeling	47,000 square feet	35,250
Project management department
Supervision	1,000 days	$160,000
Billings	7 jobs	8,000
Collections	7 jobs	10,340

Required:
1. & 2. Using ABC, compute the firm’s activity overhead rates. Form activity cost pools where appropriate. Assign costs to a 7,600-square-foot job that requires 480 contact hours, 348 design hours, and 135 days to complete. (Round activity rate answers to 2 decimal places.)

Q7. Glassworks Inc. produces two types of glass shelving, rounded edge and squared edge, on the same production line. For the current period, the company reports the following data.

	Rounded Edge	Squared Edge	Total
Direct materials	$9,500	$21,600	$31,100
Direct labor	6,100	11,800	17,900
Overhead (300% of direct labor cost)	18,300	35,400	53,700
Total cost	$33,900	$68,800	$102,700
Quantity produced	10,500 ft.	14,100 ft.
Average cost per ft. (rounded)	$3.23	$4.88

Glassworks’s controller wishes to apply activity-based costing (ABC) to allocate the $53,700 of overhead costs incurred by the two product lines to see whether cost per foot would change markedly from that reported above. She has collected the following information.

Overhead Cost Category (Activity Cost Pool)	Cost
Supervision	$2,148
Depreciation of machinery	28,680
Assembly line preparation	22,872
Total overhead	$53,700

She has also collected the following information about the cost drivers for each category (cost pool) and the amount of each driver used by the two product lines. (Round activity rate and cost per unit answers to 2 decimal places.)

		Usage
Overhead Cost Category (Activity Cost Pool)	Driver	Rounded Edge	Squared Edge	Total
Supervision	Direct labor cost ($)	$6,100	$11,800	$17,900
Depreciation of machinery	Machine hours	200 hours	800 hours	1,000 hours
Assembly line preparation	Setups (number)	31 times	93 times	124 times

Required:

Q8. Smythe Co. makes furniture. The following data are taken from its production plans for the year.

Direct labor costs		$5,440,000
Hazardous waste disposal costs		610,000

	Chairs		Tables
Expected production	206,000	units	17,000	units
Direct labor hours required	260,000	DLH	15,400	DLH
Hazardous waste disposed	300	pounds	300	pounds

Required:

Q9. Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Production Activity	Indirect Labor				Indirect Materials				Other Overhead
Grinding	$	400,000
Polishing					$	145,000
Product modification		450,000
Providing power									$	200,000
System calibration		500,000

Additional information on the drivers for its production activities follows.

Grinding	19,000	machine hours
Polishing	19,000	machine hours
Product modification	1,800	engineering hours
Providing power	14,000	direct labor hours
System calibration	1,050	batches

 

	Job 3175		Job 4286
Number of units	220	units	2,750	units
Machine hours	300	MH	3,000	MH
Engineering hours	35	eng. hours	24	eng. hours
Batches	15	batches	45	batches
Direct labor hours	490	DLH	4,410	DLH

Required:
1. Classify each activity as unit level, batch level, product level, or facility level.

Q10. Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Production Activity	Indirect Labor				Indirect Materials				Other Overhead
Grinding	$	400,000
Polishing					$	145,000
Product modification		450,000
Providing power									$	200,000
System calibration		500,000

Additional information on the drivers for its production activities follows.

Grinding	19,000	machine hours
Polishing	19,000	machine hours
Product modification	1,800	engineering hours
Providing power	14,000	direct labor hours
System calibration	1,050	batches

 

	Job 3175		Job 4286
Number of units	220	units	2,750	units
Machine hours	300	MH	3,000	MH
Engineering hours	35	eng. hours	24	eng. hours
Batches	15	batches	45	batches
Direct labor hours	490	DLH	4,410	DLH

Required:
2, 3 & 4. Compute the activity overhead rates using ABC. Combine the grinding and polishing activities into a single cost pool. Determine overhead costs to assign to the above jobs using ABC. What is the overhead cost per unit for Job 3175? What is the overhead cost per unit for Job 4286? (Round your activity rate and average overhead cost per unit to 2 decimal places. Round “overhead assigned” to the nearest whole dollar.)

Q11. Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records.

Production Activity	Indirect Labor				Indirect Materials				Other Overhead
Grinding	$	400,000
Polishing					$	145,000
Product modification		450,000
Providing power									$	200,000
System calibration		500,000

Additional information on the drivers for its production activities follows.

Grinding	19,000	machine hours
Polishing	19,000	machine hours
Product modification	1,800	engineering hours
Providing power	14,000	direct labor hours
System calibration	1,050	batches

 

	Job 3175		Job 4286
Number of units	220	units	2,750	units
Machine hours	300	MH	3,000	MH
Engineering hours	35	eng. hours	24	eng. hours
Batches	15	batches	45	batches
Direct labor hours	490	DLH	4,410	DLH

Required:
5. If the company uses a plantwide overhead rate based on direct labor hours, what is the overhead cost for each unit of Job 3175? Of Job 4286? (Do not round intermediate calculations. Round “OH Cost per unit” answers to 2 decimal places.)

Q12. Sara’s Salsa Company produces its condiments in two types: Extra Fine for restaurant customers and Family Style for home use. Salsa is prepared in department 1 and packaged in department 2. The activities, overhead costs, and drivers associated with these two manufacturing processes and the company’s production support activities follow.

Process	Activity	Overhead cost			Driver	Quantity
Department 1	Mixing	$	5,300		Machine hours	1,700
	Cooking		10,000		Machine hours	1,700
	Product testing		113,300		Batches	550
		$	128,600
Department 2	Machine calibration	$	290,000		Production runs	800
	Labeling		16,000		Cases of output	130,000
	Defects		10,000		Cases of output	130,000
		$	316,000
Support	Recipe formulation	$	98,000		Focus groups	50
	Heat, lights, and water		34,000		Machine hours	1,700
	Materials handling		73,000		Container types	10
		$	205,000

Additional production information about its two product lines follows.

	Extra Fine		Family Style
Units produced	28,000	cases	102,000	cases
Batches	280	batches	270	batches
Machine hours	650	MH	1,050	MH
Focus groups	20	groups	30	groups
Container types	7	containers	3	containers
Production runs	280	runs	520	runs

Required:
1. Using a plantwide overhead rate based on cases, compute the overhead cost that is assigned to each case of Extra Fine Salsa and each case of Family Style Salsa.
2. Using the plantwide overhead rate, determine the total cost per case for the two products if the direct materials and direct labor cost is $4 per case of Extra Fine and $3 per case of Family Style.
3.a. If the market price of Extra Fine Salsa is $13 per case and the market price of Family Style Salsa is $7 per case, determine the gross profit per case for each product.
3.b. What might management conclude about the Family Style Salsa product line?

Q13. Sara’s Salsa Company produces its condiments in two types: Extra Fine for restaurant customers and Family Style for home use. Salsa is prepared in department 1 and packaged in department 2. The activities, overhead costs, and drivers associated with these two manufacturing processes and the company’s production support activities follow.

Process	Activity	Overhead cost			Driver	Quantity
Department 1	Mixing	$	5,300		Machine hours	1,700
	Cooking		10,000		Machine hours	1,700
	Product testing		113,300		Batches	550
		$	128,600
Department 2	Machine calibration	$	290,000		Production runs	800
	Labeling		16,000		Cases of output	130,000
	Defects		10,000		Cases of output	130,000
		$	316,000
Support	Recipe formulation	$	98,000		Focus groups	50
	Heat, lights, and water		34,000		Machine hours	1,700
	Materials handling		73,000		Container types	10
		$	205,000

Additional production information about its two product lines follows.

	Extra Fine		Family Style
Units produced	28,000	cases	102,000	cases
Batches	280	batches	270	batches
Machine hours	650	MH	1,050	MH
Focus groups	20	groups	30	groups
Container types	7	containers	3	containers
Production runs	280	runs	520	runs

4. Using ABC, compute the total cost per case for each product type if the direct labor and direct materials cost is $4 per case of Extra Fine and $3 per case of Family Style. (Round your intermediate calculations to 2 decimal places. Round “Activity Rate” and “Overhead cost per unit” answers to 2 decimal places.)

Q14. Sara’s Salsa Company produces its condiments in two types: Extra Fine for restaurant customers and Family Style for home use. Salsa is prepared in department 1 and packaged in department 2. The activities, overhead costs, and drivers associated with these two manufacturing processes and the company’s production support activities follow.

Process	Activity	Overhead cost			Driver	Quantity
Department 1	Mixing	$	5,300		Machine hours	1,700
	Cooking		10,000		Machine hours	1,700
	Product testing		113,300		Batches	550
		$	128,600
Department 2	Machine calibration	$	290,000		Production runs	800
	Labeling		16,000		Cases of output	130,000
	Defects		10,000		Cases of output	130,000
		$	316,000
Support	Recipe formulation	$	98,000		Focus groups	50
	Heat, lights, and water		34,000		Machine hours	1,700
	Materials handling		73,000		Container types	10
		$	205,000

Additional production information about its two product lines follows.

	Extra Fine		Family Style
Units produced	28,000	cases	102,000	cases
Batches	280	batches	270	batches
Machine hours	650	MH	1,050	MH
Focus groups	20	groups	30	groups
Container types	7	containers	3	containers
Production runs	280	runs	520	runs

5. If the market price is $13 per case of Extra Fine and $7 per case of Family Style, determine the gross profit per case for each product. (Round your intermediate calculations and final answers to 2 decimal places.)

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