Refined costing system reduces the use of broad averages for assigning the cost of resources to cost
Question:
Refined costing system reduces the use of broad averages for assigning the cost of resources to cost objects (such as jobs, products, and services) and provides better measurement of the costs of indirect resources used by different cost objects, no matter how differently various cost objects use indirect resources. In this exercise we will determine the budgeted cost of trophies and plaques first based a single plant-wide overhead rate and then on a departmental overhead rate using activity-based costing.\ Part 2\ There are three main guidelines for refining a costing system:\ 1.\ Direct-cost tracing.\ Aims to reduce the amount of costs classified as indirect, thereby minimizing the extent to which costs have to be allocated rather than traced.\ 2.\ Indirect-cost pools.\ Expand the number of indirect-cost pools until each pool is more homogeneous. All costs in a homogeneous cost pool have the same or a similar cause-and-effect (of benefits-received) relationship with a single cost driver that is used as the cost-allocation base.\ 3.\ Cost-allocation bases.\ Whenever possible, managers should use the cost driver (the cause of indirect costs) as the cost-allocation basis for each homogeneous indirect-cost pool (the effect).\ Part 3\ Requirement 1. Calculate the budgeted unit cost of basic and deluxe trophies based on a single plantwide overhead rate, if total overhead is allocated based on total direct costs. (Don't forget to include direct material and direct manufacturing labor cost in your unit cost calculation.)\ Start by calculating the total direct costs for the basic and deluxe trophies departments.\ \ Basic\ Direct materials\ \ Forming\ $27,500\ Assembly\ 5,000\ Total direct materials\ 32,500\ Direct manufacturing labor\ \ Forming\ 31,500\ Assembly\ 15,500\ Total direct manufacturing labor\ 47,000\ Total direct costs\ $79,500\ \ Deluxe\ \ $22,550\ 4,450\ 27,000\ \ 17,500\ 19,500\ 37,000\ $64,000\ \ Total\ \ $50,050\ 9,450\ 59,500\ \ 49,000\ 35,000\ 84,000\ $143,500\ \ Part 4\ Next, calculate the budgeted overhead rate for total overhead allocated based on total direct costs. Remember that total overhead costs consists of setup and general overhead costs for the departments. (Round your answer to the nearest cent, $X.XX. Abbreviations used: DC = Direct cost, DL = Direct labor, $ = dollar.)\ Total overhead costs\ -:\ Total direct costs\ =\ Budgeted overhead rate\ $114,800\ -:\ $143,500\ =\ $0.80\ per DC $\ \ Part 5\ Now calculate the overhead allocated for the basic and deluxe using the budgeted overhead rate that was calculated above. Remember that the overhead costs for the two departments are allocated based on the total direct costs calculated above. (Round your answers to the nearest whole dollar.)\ \ Total direct costs\ \\\\times \ Total allocated overhead rate\ =\ Allocated overhead\ Basic\ $79,500\ \\\\times \ $0.80\ =\ $63,600\ Deluxe\ $64,000\ \\\\times \ $0.80\ =\ $51,200\ \ Part 6\ Finally, calculate the budgeted unit cost of basic and deluxe trophies based on a single plant-wide overhead rate, if total overhead is allocated based on total direct costs. Remember the unit cost is calculated using the total costs divided by the total number of trophies produced. (Round your final answer to the nearest cent, $X.XX.)\ \ Basic\ Deluxe\ Total\ Total direct costs\ $79,500\ $64,000\ $143,500\ Allocated overhead\ 63,600\ 51,200\ 114,800\ Total costs\ $143,100\ $115,200\ $258,300\ Unit cost\ $14.31\ $23.04\ \ Part 7\ Requirement 2. Calculate the budgeted unit cost of basic and deluxe trophies based on departmental overhead rates, where forming department overhead costs are allocated based on direct manufacturing labor costs of the forming department and assembly department overhead costs are allocated based on total direct manufacturing labor costs of the assembly department.\ Start by calculating the budgeted overhead rate for the forming and assembly departments based on direct manufacturing labor costs. Remember the budgeted overhead costs consist of setup and general overhead costs. (Round the budgeted overhead rates to the nearest cent, $X.XX.)\ \ Budgeted overhead costs\ -:\ Budgeted direct labor costs\ =\ Budgeted overhead rate\ Forming\ $58,800\ -:\ $49,000\ =\ $1.20\ per DL $\ Assembly\ $56,000\ -:\ $35,000\ =\ $1.60\ per DL $\ \ Part 8\ Finally, calculate the unit cost for the basic and deluxe trophies. Remember the unit cost is calculated using the total costs divided by the total number of trophies produced. (Round your final answer to the nearest cent, $X.XX.)\ \ Basic\ Deluxe\ Total\ Total direct costs\ $79,500\ $64,000
Cornerstones of Managerial Accounting
ISBN: 978-0324660135
3rd Edition
Authors: Mowen, Hansen, Heitger