Chapter 5 HW Problems

Problem 5-33
First-stage allocation, activity-based costing, manufacturing sector
Overhead Costs:
Wages & Salaries
Depreciation
Rent
Other O/H
Total O/H Cost

$

$

Direct Mfg.
Labor Support
Wages & Salaries
$
192,000
Depreciation
15,000
Rent
36,000
Other O/H
48,000
Total O/H Cost
$
291,000
Activity Rate $
9.70
Traditional
$
9.70
Order 448200:
Direct Mfg. Labor
Order Process
Design Support
Other
Direct Materials
Direct Labor
Direct labor rate/hour

Activity Cost Pool
Drct Mfg. Labor
Order Process
Design Support
Other

480,000
60,000
120,000
240,000
900,000

Order
Processing
$ 120,000 $
6,000
30,000
72,000
$ 228,000 $
$
456 $
8
Costs

80
1
1
80
4550
80
20 $

776
456
2,490
352
4,550
1,600
10,224

Activity Measure
# of Drct Mfg. Labor Hours
# of customer orders
# of custom designs
# of Drct Mfg. Labor Hours

Design
Support
144,000 $
9,000
12,000
84,000
249,000 $
2,490 $
8

Other
24,000 $
30,000
42,000
36,000
132,000 $
4.40
4

Heather Bayliss
MW 8-10
Total Activity for the Year
30000 direct mfg. labor-hrs
500 orders
100 Custom Designs
30000 direct Mfg labor-hrs

Total
480,000
60,000
120,000
240,000
900,000

Traditional
$
776.00
7.60
8.30
352
4550
1600
$
7,293.90

Activity based costing enhances Thurgood 's ability to price its orders because it allows for the price of the orders to be allocated accordingly to to his costs. ABC assigns the costs of resources and provides a better measurement of the cost of resources used for more accurate product costs. If Thurgood used a traditional costing system to allocate O/H costs to orders on the basis of direct mfg. labor-hours the price would not be the same and he would could be potentially loosing money because he is not pricing correctly.

1

Problem 5-34
First-stage allocation, activity-based costing, service sector
Overhead Costs:
Wages & Salaries
Depreciation
Supplies
Other O/H
Total O/H Cost

$

$

Activity Cost Pool
Estimating Jobs
Lawn Care
Landscape Design
Other

360,000
72,000
120,000
288,000
840,000

Estimating