Arrow Boards manufactures two models of surfboards, Basic and Competition, in a facility in Southern California....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Arrow Boards manufactures two models of surfboards, Basic and Competition, in a facility in Southern California. In fabrication, machine setup costs are driven by the number of setups, machine maintenance and utility costs increase with the number of machine hours, and indirect labor costs increase with direct labor hours. Facility rent and machine depreciation are fixed, and are the basis of manufacturing capacity. Fixed costs are allocated equally to each unit produced, regardless of model. Currently, Arrow uses 80% of its manufacturing capacity. The cost of unused capacity is not assigned to products, but is expensed as a separate line item. For 2020, Arrow has budgeted the following: Requirement 1. Calculate the cost-allocation rate for each of the activity-cost pools for variable and fixed overhead costs. Select the formula you will use, then calculate the cost driver rate. (Round the cost driver rates to the nearest cent, $X.XX. "Machine maint & util" = "Machine maintenance and utility costs". When calculating the cost driver rates for facility rent and depreciation, use a numerator that accounts for the fact that Arrow uses only 80% of its manufacturing capacity.) Cost driver rate Data table Arrow Boards Budgeted Costs for the Year Ended December 31, 2020 Direct materials-Basic boards Direct materials Competition boards Direct manufacturing labor-Basic boards Direct manufacturing labor-Competition boards Machine setup costs Machine maintenance and utility costs Indirect labor costs Facility rent Machine depreciation $ - X 50,000 245,000 537,600 998,400 119,000 960,000 153,600 195,000 52,500 Data table Other information: Units produced Machine hours Number of setups Direct labor-hours Basic 5.000 29,000 900 33,600 Competition 7,000 51,000 800 62,400 x Requirements Calculate the cost-allocation rate for each of the activity-cost pools for variable and fixed overhead costs. - X 1. 2. Calculate the cost of unused capacity for the year. 3. Calculate the total cost for each model, and the cost per unit for each model. 4. Arrow has the opportunity to sublease the unused factory space to a startup company that will be manufacturing surf apparel. None of Arrow's machinery will be used. Is there a minimum annual rent that Arrow should charge? Are there any other considerations that Arrow's management should make prior to offering the space? Arrow Boards manufactures two models of surfboards, Basic and Competition, in a facility in Southern California. In fabrication, machine setup costs are driven by the number of setups, machine maintenance and utility costs increase with the number of machine hours, and indirect labor costs increase with direct labor hours. Facility rent and machine depreciation are fixed, and are the basis of manufacturing capacity. Fixed costs are allocated equally to each unit produced, regardless of model. Currently, Arrow uses 80% of its manufacturing capacity. The cost of unused capacity is not assigned to products, but is expensed as a separate line item. For 2020, Arrow has budgeted the following: Requirement 1. Calculate the cost-allocation rate for each of the activity-cost pools for variable and fixed overhead costs. Select the formula you will use, then calculate the cost driver rate. (Round the cost driver rates to the nearest cent, $X.XX. "Machine maint & util" = "Machine maintenance and utility costs". When calculating the cost driver rates for facility rent and depreciation, use a numerator that accounts for the fact that Arrow uses only 80% of its manufacturing capacity.) Cost driver rate Data table Arrow Boards Budgeted Costs for the Year Ended December 31, 2020 Direct materials-Basic boards Direct materials Competition boards Direct manufacturing labor-Basic boards Direct manufacturing labor-Competition boards Machine setup costs Machine maintenance and utility costs Indirect labor costs Facility rent Machine depreciation $ - X 50,000 245,000 537,600 998,400 119,000 960,000 153,600 195,000 52,500 Data table Other information: Units produced Machine hours Number of setups Direct labor-hours Basic 5.000 29,000 900 33,600 Competition 7,000 51,000 800 62,400 x Requirements Calculate the cost-allocation rate for each of the activity-cost pools for variable and fixed overhead costs. - X 1. 2. Calculate the cost of unused capacity for the year. 3. Calculate the total cost for each model, and the cost per unit for each model. 4. Arrow has the opportunity to sublease the unused factory space to a startup company that will be manufacturing surf apparel. None of Arrow's machinery will be used. Is there a minimum annual rent that Arrow should charge? Are there any other considerations that Arrow's management should make prior to offering the space?
Expert Answer:
Answer rating: 100% (QA)
Requirement 1 Calculate the costallocation rate for each of the activitycost pools for variable and fixed overhead costs Cost Allocation Rate for Variable Overhead Costs Variable Overhead Cost Total C... View the full answer
Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133428704
15th edition
Authors: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Posted Date:
Students also viewed these accounting questions
-
Whitewater Adventures manufactures two models of kayaks, Basic and Deluxe, using a combination of machining and hand finishing. Machine setup costs are driven by the number of setups. Indirect...
-
Whitewater Adventures manufactures two models of kayaks, Basic and Deluxe, using a combination of machining and hand finishing. Machine setup costs are driven by the number of setups. Indirect...
-
Whitewater Adventures manufactures two models of kayaks, Basic and Deluxe, using a combination of machining and hand finishing. Machine setup costs are driven by the number of setups. Indirect...
-
If the rate of a plane in still air is x mph and the rate of a steady wind is 20 mph, what is the rate of the plane in each case? (a) The plane is flying into the wind (that is, into a headwind,...
-
Pitney Corporation manufactures two types of transpondersno. 156 and no. 157and applies manufacturing overhead to all units at the rate of $76.50 per machine hour. Production information follows. The...
-
In Exercises 59 through 74, solve the given equation by factoring. x 2 16 = 0
-
Balance sheet hedging Gateaux Antoinette, SA, a subsidiary of Antoinette Cakes Inc., New York, had cash of 100,000 and accounts receivable of 100,000 each on its books (or 200,000 in total) when the...
-
The famous Y. S. Chang Restaurant is open 24 hours a day. Waiters and busboys report for duty at 3 A.M., 7 A.M., 11 A.M., 3 P.M., 7 P.M., or 11 P.M., and each works an 8-hour shift. The following...
-
A.A currency swap can be viewed as a portfolio of a long position in a bond denominated in one currency and a short position in a bond denominated in another currency. B.A currency swap can be viewed...
-
Georgia Orchards produced a good crop of peaches this year. After preparing the following income statement, the company believes it should have given its No. 3 peaches to charity and saved its...
-
Nextgen Corporation has its head office in Sydney and operates throughout Australia and New Zealand. There are three main divisions: . Newspaper division which owns leading tabloid newspapers in...
-
How would you go about promoting internal auditing to executive management? To the board?
-
Internal auditing can best be described as: a. An accounting function. b. A compliance function. c. An activity primarily to detect fraud. d. An internal control function. e. An activity that...
-
The charter for an internal auditing department should indicate responsibility for: a. Reconciling bank accounts. b. Developing standards of control in new EDP systems. c. Developing job descriptions...
-
The independence of the internal auditing department is enhanced when the: a. Board of directors concurs in the appointment or removal of the director of internal auditing. b. Director of internal...
-
The scope of work of the internal auditing department should include: a. Reviewing the reliability and integrity of divisional financial reports. b. Determining compliance with applicable laws and...
-
Use the following information to calculate the value of a business that your firm is considering acquiring. Firm's WACC: 12.5% Firm's Cash Flows: $1 million FCF, years 1-4 $1.05 million FCF, year 5...
-
Consider the reaction of acetic acid in water CH 3 CO 2 H(aq) + H 2 O(l) CH3CO 22 (aq) + H 3 O + (aq) where Ka 5 1.8 3 1025. a. Which two bases are competing for the proton? b. Which is the stronger...
-
The Harvest Corporation uses multicolored molding to make plastic lamps. The molding operation has a capacity of 100,000 units per year. The demand for lamps is very strong. Harvest will be able to...
-
Ames Air Force Base has a bay that specializes in maintenance for aircraft engines. It uses standard costing and flexible budgets to account for this activity. For 2014, budgeted variable overhead at...
-
Castor, a division of Gemini Corporation, is located in the United States. Its effective income tax rate is 30%. Another division of Gemini, Pollux, is located in Canada, where the income tax rate is...
-
Consider the following three-player game in strategic form. Each player has two strategies: Player I has the strategies \(T\) and \(B\) (the top and bottom row), player II has the strategies \(l\)...
-
Consider the following \(3 \times 3\) game. (a) Identify all pairs of strategies where one strategy weakly dominates the other. (b) Assume you are allowed to remove a weakly dominated strategy of...
-
Consider the following game tree. As always, the top payoffs at a leaf are for player I and bottom payoffs for player II. (a) What is the number of strategies of player I and of player II? (b) How...
Study smarter with the SolutionInn App