Question: BRIEF EXERCISE 5-1 Applying ABC Cost Hierarchy [LO2 - CC4, 5] The following activities occur at Greenwich Corporation, a company that manufactures a variety of
BRIEF EXERCISE 5-1
Applying ABC Cost Hierarchy [LO2 - CC4, 5]
The following activities occur at Greenwich Corporation, a company that manufactures a variety of products:
- Receive raw materials from suppliers.
- Manage parts inventories.
- Do rough milling work on products.
- Interview and process new employees in the human resources department.
- Design new products.
- Perform periodic preventative maintenance on general-use equipment.
- Use the general factory building.
- Issue purchase orders for a job.
Required:
Classify each of the activities as a unit-level, batch-level, product-level, or facility-level cost activity.
BRIEF EXERCISE 5-2
Computing Activity Rates [LO1 - CC1; LO2 - CC6]
Kramer Corporation is a diversified manufacturer of consumer goods. The company's activity-based costing system has the following seven activity cost pools:
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Activity Cost Pool
Estimated Overhead Cost
Expected Activity
Labour related
$ 48,000
10,000
direct labour-hours
Machine related
67,500
30,000
machine-hours
Machine setups
84,000
600
setups
Production orders
112,000
4,000
orders
Product testing
58,500
1,800
tests
Packaging
90,000
4,500
packages
General factory
672,000
10,000
direct labour-hours
Required:
- Compute the activity rate for each activity cost pool.
- Compute the company's predetermined overhead rate, assuming that the company uses a single plantwide, predetermined overhead rate based on direct labour-hours.
BRIEF EXERCISE 5-3
Computing ABC Product Costs [LO1 - CC2; LO2 - CC3, 6, 7]
Klumper Corporation is a diversified manufacturer of industrial goods. The company's ABC system has the following six activity cost pools and activity rates:
Activity Cost Pool
Activity Rates
Labour related
$18.00
per direct labour-hour
Machine related
18.00
per machine-hour
Machine setups
50.00
per setup
Production orders
120.00
per order
Shipments
18.00
per shipment
General factory
38.00
per direct labour-hour
Cost and activity data have been supplied for the following products:
K425
M67
Direct materials cost per unit
$126.00
$212.00
Direct labour cost per unit
$7.20
$4.50
Number of units produced per year
400
4,000
Total Expected Activity
K425
M67
Direct labour-hours
160
1,000
Machine-hours
200
3,000
Machine setups
2
8
Production orders
2
8
Shipments
2
20
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Required:
Compute the unit product cost of each of the products listed above.
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