Managerial Accounting Notes

Topics: Costs, Customer service, Cost Pages: 3 (450 words) Published: March 27, 2013
Accounting chapter 7 managerial accounting
Exercises
Lambert Fabrication, Inc., uses activity-based costing data for internal decisions. The company has the following four activity cost pools: Activity Cost PoolAnnual Activity
Producing units5,000 machine-hours
Processing orders1,000 orders
Customer support200 customers
OtherNot applicable
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The company traces the costs of direct materials and direct labor to jobs (i.e., orders). Overhead costs—both manufacturing and non-manufacturing—are allocated to jobs using the activity-based costing system. These overhead costs are listed below: Indirect factory wages$100,000

Other manufacturing overheadS200,000
Selling and administrative expense$400,000
To develop the company's activity-based costing system, employees were asked how they distributed their time and resources across the four activity cost pools. The results of those interviews appear below: Results of Interviews of Employees

Distribution of Resource Consumption Across Activities Producing Processing Customer UnitsOrdersSupportOtherTotals
Indirect factory wages40%30%10%20%100%
Other manufacturing overhead30%10%0%60%100%
Selling and administrative expense0%25%40%35%100%
a. Using the results of the interviews, carry out the first-stage allocation of costs to the activity cost pools. Producing Processing Customer
UnitsOrdersSupportOtherTotals
Indirect factory wages $ S S $ S
Other manufacturing overhead Selling and administrative expense.. Total overhead cost $$ $___ ___ $ $__ ____

Chapter 7
b.Using the results of the first-stage allocation, compute the activity rates for each of the activity cost pools. (Activity rates are not computed for the...
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