Exercise 21-2 Activity-based costing of overhead L.O. P2
Pane Company 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
$
9,700
$
21,700
$
31,400
Direct labor
6,100
11,900
18,000
Overhead (300% of direct labor cost)
18,300
35,700
54,000
Total cost
$
34,100
$
69,300
$
103,400
Quantity produced
10,700
ft.
14,200
ft.
Average cost per ft.
$
3.19
$
4.88
Pane’s controller wishes to apply activity-based costing (ABC) to allocate the $54,000 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
$
2,160
Depreciation of machinery
28,840
Assembly line preparation
23,000
Total overhead
$
54,000
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.
Usage
Overhead Cost Category
(Activity Cost Pool)
Driver
Rounded Edge
Squared Edge
Total
Supervision
Direct labor cost ($)
$
6,100
$
11,900
$
18,000
Depreciation of machinery
Machine hours
200
hours
700
hours
900
hours
Assembly line preparation
Setups (number)
31
times
95
times
126
times
1.
Assign these three overhead cost pools to each of the two products using ABC. (Do not round your intermediate calculations and round final answers to the nearest dollar amount. Omit the “$” sign in your response.)
2.
Determine average cost per foot for each of the two products using ABC. (Do not round your intermediate calculations. Round your answers to 2 decimal places. Omit the “$” sign in your response.)
Exercise 21-2 Activity-based costing of overhead L.O. P2
Learning Objective: 21-P2 Assign overhead costs using activity-based costing.
2.
award: 4.50 out of
4.50 points
Exercise 21-5 Service department expenses allocated to operating departments L.O. P3
Advertising and purchasing department expenses of Bookworm Bookstore are allocated to operating departments on the basis of dollar sales and purchase orders, respectively. Information about the allocation bases for the three operating departments follows.
Department
Sales
Purchase Orders
Books
$
449,000
423
Magazines
144,000
310
Newspapers
208,000
265
Total
$
801,000
998
Complete the following table by allocating the expenses of the two service departments (advertising and purchasing) to the three operating departments. (Negative amounts should be indicated by a minus sign. Do not round your intermediate percentages of expense allocation and round intermediate dollar amounts and final answers to the nearest whole number. Omit the “$” sign in your response.)
Exercise 21-5 Service department expenses allocated to operating departments L.O. P3
Learning Objective: 21-P3 Prepare departmental income statements and contribution reports.
3.
award: 4.50 out of
4.50 points
Exercise 21-6 Indirect payroll expense allocated to departments L.O. C1
Monica Gellar works in both the jewelry department and the hosiery department of a retail store. Gellar assists customers in both departments and arranges and stocks merchandise in both departments. The store allocates Gellar’s $20,000 annual wages between the two departments based on a sample of the time worked in the two departments. The sample is obtained from a diary of hours worked that Gellar kept in a randomly chosen two-week period. The diary showed the following hours and activities spent in the two departments.
Selling in jewelry department
64 hours
Arranging and stocking merchandise in jewelry department
6 hours
Selling in hosiery department
12 hours
Arranging and stocking merchandise in hosiery department
12 hours
Idle time spent waiting for a customer to enter one of the selling departments
4 hours
Allocate Gellar’s annual wages between the two departments. (Round your percentage answers to 1 decimal place. Omit the “$” & “%” signs in your response.)
Exercise 21-6 Indirect payroll expense allocated to departments L.O. C1
Learning Objective: 21-C1 Distinguish between direct and indirect expenses and identify bases for allocating indirect expenses to departments.
4.
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