Compute overhead rates and overhead costs for various jobs. Introduction Note: Accounting requires specific steps that need to be executed in a sequence. The assessments in this cou
Compute overhead rates and overhead costs for various jobs.
Introduction
Note: Accounting requires specific steps that need to be executed in a sequence. The assessments in this course are presented in sequence and must be completed in order.
Every activity in an organization can be calculated as a cost.
Activity-based systems provide managers with cost information for strategic decision making and planning that is not readily available with other costing methods.
Instructions
Note: Accounting requires specific steps that need to be executed in a sequence. The assessments in this course are presented in sequence and must be completed in order.
Use the Applying Activity-Based Costing Template [XLSX] to complete this assessment. This assessment allows you to practice applying activity-based costing (ABC) to classify activities on a unit level, batch level, product level, or facility level. You also compute activity overhead rates using ABC and determine overhead cost per unit, based on the given information.
Competencies Measured
By successfully completing this assessment, you will demonstrate your proficiency in the course competencies through the following assessment scoring guide criteria:
- Competency 1: Analyze cost accounting systems.
- Classify business activities as occurring at the unit level, batch level, product level, or facility level.
- Competency 2: Apply sound budgeting principles.
- Compute activity overhead rates.
- Compute the overhead rate.
- Competency 4: Analyze financial statements.
- Compute the overhead costs that should be assigned to different jobs.
- Compute the overhead cost per unit for different jobs.
- Compute the overhead cost per unit for different jobs, using the overhead rate.
- Competency 5: Communicate in a manner that is professional and consistent with expectations for professionals in the field of accounting.
- Communicate quantitative information accurately and effectively.
Problem 1
| BUS-FPX4061 – Managerial Accounting Principles | ||||||||||||||||||||
| Assessment 5: Applying Activity-Based Costing Worksheet | ||||||||||||||||||||
| Problem 1 | ||||||||||||||||||||
| Solve the given problem based on the following information. | Input values | |||||||||||||||||||
| Conglomco Company's overhead costs are as follows: | Company name | Conglomco | ||||||||||||||||||
| Production Activity | Indirect Labor ($) | Indirect Materials ($) | Other Overheads ($) | Production Activity | Indirect Labor ($) | Indirect Materials ($) | Other Overheads ($) | |||||||||||||
| Grinding | 325,000 | Grinding | 325,000 | |||||||||||||||||
| Sanding | 130,000 | Sanding | 130,000 | |||||||||||||||||
| Product modification | 700,000 | Product modification | 700,000 | |||||||||||||||||
| Electrical | 250,000 | Electrical | 250,000 | |||||||||||||||||
| System calibration | 600,000 | System calibration | 600,000 | |||||||||||||||||
| Activity | Resources | Activity | Resources | |||||||||||||||||
| Grinding | 13,000 machine hours | Grinding | Machine hours | 13,000 | ||||||||||||||||
| Sanding | 13,000 machine hours | Sanding | Machine hours | 13,000 | ||||||||||||||||
| Product modification | 1,500 engineering hours | Product modification | Engineering hours | 1,500 | ||||||||||||||||
| Electrical | 17,000 direct labor hours | Electrical | Direct labor hours | 17,000 | ||||||||||||||||
| System calibration | 400 batches | System calibration | Batches | 400 | ||||||||||||||||
| Each production activity can be classified into different levels: | ||||||||||||||||||||
| · | Unit level | |||||||||||||||||||
| · | Batch level | |||||||||||||||||||
| · | Product level | |||||||||||||||||||
| · | Facility level | |||||||||||||||||||
| Classify the following activities into the appropriate levels. | ||||||||||||||||||||
| Activity | Level | |||||||||||||||||||
| Grinding | ||||||||||||||||||||
| Sanding | ||||||||||||||||||||
| Product modification | ||||||||||||||||||||
| Electrical | ||||||||||||||||||||
| System calibration | ||||||||||||||||||||
Problem 2
| Problem 2 | ||||||||||||||||||||
| Solve the given problem based on the following information. | Input values | |||||||||||||||||||
| JordanCompany's overhead costs are as follows: | Company name | Jordan | ||||||||||||||||||
| Production Activity | Indirect Labor ($) | Indirect Materials ($) | Other Overheads ($) | Production Activity | Indirect Labor ($) | Indirect Materials ($) | Other Overheads ($) | |||||||||||||
| Grinding | 352,000 | Grinding | 352,000 | |||||||||||||||||
| Sanding | 148,500 | Sanding | 148,500 | |||||||||||||||||
| Product modification | 660,000 | Product modification | 660,000 | |||||||||||||||||
| Electrical | 280,500 | Electrical | 280,500 | |||||||||||||||||
| System calibration | 550,000 | System calibration | 550,000 | |||||||||||||||||
| Activity | Resources | Activity | Resources | |||||||||||||||||
| Grinding | 13,000 machine hours | Grinding | Machine hours | 13,000 | ||||||||||||||||
| Sanding | 13,000 machine hours | Sanding | Machine hours | 13,000 | ||||||||||||||||
| Product modification | 1,500 engineering hours | Product modification | Engineering hours | 1,500 | ||||||||||||||||
| Electrical | 17,000 direct labor hours | Electrical | Direct labor hours | 17,000 | ||||||||||||||||
| System calibration | 400 batches | System calibration | Batches | 400 | ||||||||||||||||
| Compute overhead rates for each activity and create cost pools as appropriate. | ||||||||||||||||||||
| Round the answers to two decimal places. | ||||||||||||||||||||
| Activity | Equation | Overhead rates | ||||||||||||||||||
| Grinding | ||||||||||||||||||||
| Sanding | ||||||||||||||||||||
| Product modification | ||||||||||||||||||||
| Electrical | ||||||||||||||||||||
| System calibration | ||||||||||||||||||||
Problem 3
| Problem 3 | Input values | ||||||||||||||||||||||
| Solve the given problem based on the following information. | |||||||||||||||||||||||
| Company name | Jordan | ||||||||||||||||||||||
| JordanCompany's overhead costs are as follows: | |||||||||||||||||||||||
| Production Activity | Indirect Labor ($) | Indirect Materials ($) | Other Overheads ($) | Production Activity | Indirect Labor ($) | Indirect Materials ($) | Other Overheads ($) | ||||||||||||||||
| Grinding | 352,000 | Grinding | 352,000 | ||||||||||||||||||||
| Sanding | 148,500 | Sanding | 148,500 | ||||||||||||||||||||
| Product modification | 660,000 | Product modification | 660,000 | ||||||||||||||||||||
| Electrical | 280,500 | Electrical | 280,500 | ||||||||||||||||||||
| System calibration | 550,000 | System calibration | 550,000 | ||||||||||||||||||||
| Activity | Resources | Activity | Resources | ||||||||||||||||||||
| Grinding | 13,000 machine hours | Grinding | Machine hours | 13,000 | |||||||||||||||||||
| Sanding | 13,000 machine hours | Sanding | Machine hours | 13,000 | |||||||||||||||||||
| Product modification | 1,500 engineering hours | Product modification | Engineering hours | 1,500 | |||||||||||||||||||
| Electrical | 17,000 direct labor hours | Electrical | Direct labor hours | 17,000 | |||||||||||||||||||
| System calibration | 400 batches | System calibration | Batches | 400 | |||||||||||||||||||
| Job P and Job Q use the following resources: | |||||||||||||||||||||||
| Resources | Job P | Job Q | |||||||||||||||||||||
| Resources | Job P | Job Q | Batches | 30 | 90 | ||||||||||||||||||
| Batches | 30 | 90 | Engineering hours | 26 | 32 | ||||||||||||||||||
| Engineering hours | 26 | 32 | Machine hours | 550 | 5,500 | ||||||||||||||||||
| Machine hours | 550 | 5,500 | Direct labor hours | 500 | 4,375 | ||||||||||||||||||
| Direct labor hours | 500 | 4,375 | |||||||||||||||||||||
| Job P | Job Q | ||||||||||||||||||||||
| Job P | Job Q | Number of units | 200 | 2,500 | |||||||||||||||||||
| Number of units | 200 | 2,500 | |||||||||||||||||||||
| Given the information in the table above, compute overhead costs for each job. | |||||||||||||||||||||||
| Round the overhead rates to two decimal places. Round all other numbers to the nearest dollar. | |||||||||||||||||||||||
| Activity | Job P | Job Q | |||||||||||||||||||||
| Grinding | |||||||||||||||||||||||
| Polishing | |||||||||||||||||||||||
| Product modification | |||||||||||||||||||||||
| Providing power | |||||||||||||||||||||||
| System calibration | |||||||||||||||||||||||
| Total cost of job | |||||||||||||||||||||||
Problem 4
| Problem 4 | |||||||||||||||||||
| Solve the given problem based on the following information. | Input values | ||||||||||||||||||
| JordanCompany's overhead costs are as follows: | Company name | Jordan | |||||||||||||||||
| Production Activity | Indirect Labor ($) | Indirect Materials ($) | Other Overheads ($) | Production Activity | Indirect Labor ($) | Indirect Materials ($) | Other Overheads ($) | ||||||||||||
| Grinding | 352,000 | Grinding | 352,000 | ||||||||||||||||
| Sanding | 148,500 | Sanding | 148,500 | ||||||||||||||||
| Product modification | 660,000 | Product modification | 660,000 | ||||||||||||||||
| Electrical | 280,500 | Electrical | 280,500 | ||||||||||||||||
| System calibration | 550,000 | System calibration | 550,000 | ||||||||||||||||
| Activity | Resources | Activity | Resources | ||||||||||||||||
| Grinding | 13,000 machine hours | Grinding | Machine hours | 13,000 | |||||||||||||||
| Sanding | 13,000 machine hours | Sanding | Machine hours | 13,000 | |||||||||||||||
| Product modification | 1,500 engineering hours | Product modification | Engineering hours | 1,500 | |||||||||||||||
| Electrical | 17,000 direct labor hours | Electrical | Direct labor hours | 17,000 | |||||||||||||||
| System calibration | 400 batches | System calibration | Batches | 400 | |||||||||||||||
| Job P and Job Q use the following resources: | Resources | Job P | Job Q | ||||||||||||||||
| Batches | 30 | 90 | |||||||||||||||||
| Resources | Job P | Job Q | Engineering hours | 26 | 32 | ||||||||||||||
| Batches | 30 | 90 | Machine hours | 550 | 5,500 | ||||||||||||||
| Engineering hours | 26 | 32 | Direct labor hours | 500 | 4,375 | ||||||||||||||
| Machine hours | 550 | 5,500 | |||||||||||||||||
| Direct labor hours | 500 | 4,375 | Job P | Job Q | |||||||||||||||
| Number of units | 200 | 2,500 | |||||||||||||||||
| Job P | Job Q | ||||||||||||||||||
| Number of units | 200 | 2,500 | |||||||||||||||||
| What is the overhead cost per unit for Job P and Job Q? | |||||||||||||||||||
| Round the overhead rates and average cost per unit to two decimal places. | |||||||||||||||||||
| Round all other numbers to the nearest dollar. | |||||||||||||||||||
| Costs | Job P | Job Q | |||||||||||||||||
| Total overhead cost of job / Number of units in job | |||||||||||||||||||
| Average overhead cost per unit | |||||||||||||||||||
Problem 5
| Problem 5 | Input values | |||||||||||||||||||
| Solve the given problem based on the following information. | ||||||||||||||||||||
| JordanCompany's overhead costs are as follows: | Company name | Jordan | ||||||||||||||||||
| Production Activity | Indirect Labor ($) | Indirect Materials ($) | Other Overheads ($) | Production Activity | Indirect Labor ($) | Indirect Materials ($) | Other Overheads ($) | |||||||||||||
| Grinding | 352,000 | Grinding | 352,000 | |||||||||||||||||
| Sanding | 148,500 | Sanding | 148,500 | |||||||||||||||||
| Product modification | 660,000 | Product modification | 660,000 | |||||||||||||||||
| Electrical | 280,500 | Electrical | 280,500 | |||||||||||||||||
| System calibration | 550,000 | System calibration | 550,000 | |||||||||||||||||
| Activity | Resources | Activity | Resources | |||||||||||||||||
| Grinding | 13,000 machine hours | Grinding | Machine hours | 13,000 | ||||||||||||||||
| Sanding | 13,000 machine hours | Sanding | Machine hours | 13,000 | ||||||||||||||||
| Product modification | 1,500 engineering hours | Product modification | Engineering hours | 1,500 | ||||||||||||||||
| Electrical | 17,000 direct labor hours | Electrical | Direct labor hours | 17,000 | ||||||||||||||||
| System calibration | 400 batches | System calibration | Batches | 400 | ||||||||||||||||
| Job P and Job Q use the following resources: | ||||||||||||||||||||
| Resources | Job P | Job Q | ||||||||||||||||||
| Resources | Job P | Job Q | Batches | 30 | 90 | |||||||||||||||
| Batches | 30 | 90 | Engineering hours | 26 | 32 | |||||||||||||||
| Engineering hours | 26 | 32 | Machine hours | 550 | 5,500 | |||||||||||||||
| Machine hours | 550 | 5,500 | Direct labor hours | 500 | 4,375 | |||||||||||||||
| Direct labor hours | 500 | 4,375 | ||||||||||||||||||
| Job P | Job Q | |||||||||||||||||||
| Job P | Job Q | Number of units | 200 | 2,500 | ||||||||||||||||
| Number of units | 200 | 2,500 | ||||||||||||||||||
| Compute overhead costs for the units produced for Job P and Job Q. | ||||||||||||||||||||
| Base the calculation on a plant-wide overhead rate that is based on direct labor hours. | ||||||||||||||||||||
| Round all answers to the nearest dollar. | ||||||||||||||||||||
| Activity | Plant-Wide Rate | |||||||||||||||||||
| Grinding | ||||||||||||||||||||
| Polishing | ||||||||||||||||||||
| Product modification | ||||||||||||||||||||
| Providing power | ||||||||||||||||||||
| System calibration | ||||||||||||||||||||
| Total overhead cost | ||||||||||||||||||||
| Rate per direct labor hour | ||||||||||||||||||||
| (Total overheads / Direct labor hours) | ||||||||||||||||||||
| Overhead cost for a job = Total direct labor hours × Overhead rate | ||||||||||||||||||||
| Job P | ||||||||||||||||||||
| Job Q | ||||||||||||||||||||
| Average overhead cost per unit = Overhead cost / Units in each job | ||||||||||||||||||||
| Job P | ||||||||||||||||||||
| Job Q | ||||||||||||||||||||
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