KJ Company has analyzed its production processes and has determined that the following five activities with...
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KJ Company has analyzed its production processes and has determined that the following five activities with the appropriate cost drivers are the main causes of overhead: machine hours (# of machine hours), machine setups (# of setups), quality control (# of inspections), purchase orders (# of purchase orders), and receiving material (a of receiving reports). The company is interested in implementing an activity-based costing system to better allocate overhead. KJ has been using direct labor hours to apply overhead to production. KJ makes three products: X, Y, Z KJ's production in units, direct material costs, direct labor costs, and overhead cost are as follows: Units produced Direct labor hours per unit Direct material per unit Direct labor per unit Activity Machine hours Machine setups Quality control Purchase orders Receiving reports a. b. C d. 0. f. 30,000 2 $100 $50 Overhead Dollars $100.000 175,000 150,000 80,000 95,000 20.000 2.5 $150 $30 10,000 1,200 1,000 75 1,500 Z 10,000 3 $75 $40 Events or Transactions Y 15,000 900 1,600 200 5,000 Z 25,000 2,900 2,400 225 3,500 Compute the predetermined overhead rate using the traditional overhead allocation. Calculate the cost to produce one unit of each product using traditional overhead allocation. Assume that KJ has made the change to ABC, compute the overhead rate per activity. Using the rates calculated in Part c, determine the amount of overhead assigned to each unit of product. Using the information from Part d. compute the cost to manufacture one unit of each product. If product X sells for $165, product Y sells for $210, and product Z sells for $140, what is the order of profitability for the products under the traditional costing system? Under ABC system? KJ Company has analyzed its production processes and has determined that the following five activities with the appropriate cost drivers are the main causes of overhead: machine hours (# of machine hours), machine setups (# of setups), quality control (# of inspections), purchase orders (# of purchase orders), and receiving material (a of receiving reports). The company is interested in implementing an activity-based costing system to better allocate overhead. KJ has been using direct labor hours to apply overhead to production. KJ makes three products: X, Y, Z KJ's production in units, direct material costs, direct labor costs, and overhead cost are as follows: Units produced Direct labor hours per unit Direct material per unit Direct labor per unit Activity Machine hours Machine setups Quality control Purchase orders Receiving reports a. b. C d. 0. f. 30,000 2 $100 $50 Overhead Dollars $100.000 175,000 150,000 80,000 95,000 20.000 2.5 $150 $30 10,000 1,200 1,000 75 1,500 Z 10,000 3 $75 $40 Events or Transactions Y 15,000 900 1,600 200 5,000 Z 25,000 2,900 2,400 225 3,500 Compute the predetermined overhead rate using the traditional overhead allocation. Calculate the cost to produce one unit of each product using traditional overhead allocation. Assume that KJ has made the change to ABC, compute the overhead rate per activity. Using the rates calculated in Part c, determine the amount of overhead assigned to each unit of product. Using the information from Part d. compute the cost to manufacture one unit of each product. If product X sells for $165, product Y sells for $210, and product Z sells for $140, what is the order of profitability for the products under the traditional costing system? Under ABC system?
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Here are the steps to solve this problem a Calculate the cost to produce one unit of each product using traditional overhead allocation Overhead rate Total Overhead Total Direct Labor Hours 600000 600... View the full answer
Related Book For
Introduction to Managerial Accounting
ISBN: 978-1259105708
5th Canadian edition
Authors: Peter C. Brewer, Ray H. Garrison, Eric Noreen, Suresh Kalagnanam, Ganesh Vaidyanathan
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