Accounting Practice

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ACG 5075 Team Assignment 2
1. Describe Wilkerson’s existing cost system and develop a diagram to show how costs flow from factory expense accounts to products. Currently, Wilkerson uses a volume-based costing. The direct labor cost, material cost and the overhead are allocated to the products as the variable cost. The overhead use a proportion to the products’ direct labor cost at a rate of 300%. Account Payable xx (1) Row Materials xx xx Work-In-Process xx xx (10) xx xx Finish Goods and Inventory (10) xx xx (11) Cost of Goods Sold xx

(1)

(2)

(2) (3) (9)

(11)

Cash or Other Payable xx (4) xx (5) xx (6) xx (7) xx (8)

Wage Payable xx

(3) (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) Purchased Materials Direct Material Cost Direct Labor Cost Setup Labor Machine-related Expense Receiving and Production Control Engineering Packaging and Shipping Manufacturing Overhead Accumulated product cost Cost After goods sold

Manufacturing Overhead (4) xx xx (9) (5) xx (6) xx (7) xx (8) xx

Figure 1 Production Cost Flow

2. Develop an activity-based cost model using the information in the case. Provide your best estimates about the cost and profitability of Wilkerson’s three product lines. To develop the activity-based cost model, we need to figure out the activities and assign manufacturing overhead resource costs to activity cost pools, then to assign cost from activities pools to cost objectives. The following table shows the activities, the activity cost and the unit activity rates. Table 1 Detail of unit activity rates

Activities Machine-related expenses Setup labor Receiving and production control Engineering Packaging and shipping

Total Activity Aactivities Unit Activity Cost Quantity Rates Activity Cost Drivers $ 336,000 Machine hours 11200 $ 30 $ 40,000 Production run 160 $ 250 $ 180,000 Production run 160 $ 1,125 $ 100,000 Hours of engineering work 1250 $ 80 $ 150,000 Number of shippment 300 $ 500

We also can find the volume of cost...
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