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Topic 2c - Class Exercise - Question

This document contains four exercises involving the use of activity-based costing to allocate overhead costs. The first two exercises provide cost pool, overhead, and activity driver data for different companies and asks to calculate the activity-based overhead rates. The third exercise compares traditional overhead allocation to activity-based costing for two products at a company. The fourth exercise provides multi-pool, multi-product data and asks to calculate the overhead cost per unit for each product using activity-based costing.

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Muhd Imran
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95 views

Topic 2c - Class Exercise - Question

This document contains four exercises involving the use of activity-based costing to allocate overhead costs. The first two exercises provide cost pool, overhead, and activity driver data for different companies and asks to calculate the activity-based overhead rates. The third exercise compares traditional overhead allocation to activity-based costing for two products at a company. The fourth exercise provides multi-pool, multi-product data and asks to calculate the overhead cost per unit for each product using activity-based costing.

Uploaded by

Muhd Imran
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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BAC1054 – PRINCIPLES OF MANAGEMENT ACCOUNTING

CLASS EXERCISE
TOPIC 2c: PRODUCT COSTING (ACTIVITY BASED COSTING)

1. Tunes & More, Inc. manufactures speakers and receivers and uses activity-based
costing. The following information is available:
Expected Use of
Activity Cost Pool Estimated Overhead Cost Driver per Activity
Ordering RM216,000 24,000 orders
Soldering 192,000 64,000 machine hours
Inspecting 960,000 120,000 labor hours
Packing 840,000 56,000 boxes

Instructions
Compute the activity-based overhead rates.

2. Gail Industries uses activity-based costing to assist management in setting prices for
the company’s three major product lines. The following information is available:
Estimated Expected Use of
Activity Cost Pool Overhead Cost Driver per Activity
Cutting RM1,000,000 25,000 labor hours
Stitching 8,000,000 320,000 machine hours
Inspections 2,800,000 160,000 labor hours
Packing 960,000 64,000 finished goods units

Instructions
Compute the activity-based overhead rates.

3. Hayward Industries manufactures dining chairs and tables. The following information
is available:
Dining Chairs Tables Total Cost
Machine setups 200 600 RM48,000
Inspections 250 470 RM72,000
Labor hours 2,600 2,400

Hayward is considering switching from one overhead rate based on labor hours to
activity-based costing.

Instructions
Perform the following analyses for these two components of overhead:
a. Compute total machine setups and inspection costs assigned to each product, using
a single overhead rate.
b. Compute total machine setups and inspection costs assigned to each product, using
activity-based costing.
c. Comment on your findings.

PNIR
BAC1054 – PRINCIPLES OF MANAGEMENT ACCOUNTING
CLASS EXERCISE
TOPIC 2c: PRODUCT COSTING (ACTIVITY BASED COSTING)

4. Sonoma Manufacturing has five activity cost pools and two products (a budget tape
vacuum and a deluxe tape vacuum). Information is presented below:

Cost Drivers by Product


Activity Cost Pool Cost Driver Est. Overhead Budget Deluxe
Ordering and Receiving Orders RM 120,000 600 400
Machine Setup Setups 297,000 500 400
Machining Machine hours 1,000,000 150,000 100,000
Assembly Parts 1,400,000 1,200,000 800,000
Inspection Inspections 300,000 550 450

Instructions
Compute the overhead cost per unit for each product. Production is 700,000 units of Budget and
200,000 units of Deluxe. Round your answer to the nearest cent.

PNIR

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