Exam 4: Activity Based Costing

The Beauty Beyond Words Salon uses an activity-based costing system in its beauty salon to determine the cost of services. The salon has determined the costs of services by activity as follows: Calculate the cost of services for a haircut.

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Determine the activity-based cost for each disk drive unit.

The Kaumajet Factory produces two products - table lamps and desk lamps. It has two separate departments - Finishing and Production. The overhead budget for the Finishing Department is $550,000, using 500,000 direct labor hours. The overhead budget for the Production Department is $400,000 using 80,000 direct labor hours. If the budget estimates that a desk lamp will require 1 hours of finishing and 2 hours of production, how much factory overhead will the Kaumajet Factory allocate to each unit of desk lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours?

The Botosan Factory has determined that its budgeted factory overhead budget for the year is $13,500,000 and budgeted direct labor hours are 10,000,000. If the actual direct labor hours for the period are 350,000, how much overhead would be allocated to the period?

The Camper's Edge Factory produces two products - canopies and tents. It has two separate departments - Cutting and Sewing. The budget is $350,000 for the Cutting Department and $400,000 for the Sewing Department. Each canopy requires 2 hours of cutting and 1 hour of sewing. Each tent requires 1 hour of cutting and 6 hours of sewing. The budget estimates that 20,000 canopies and 10,000 tents will be manufactured during the year. Determine (a) the total number of budgeted direct labor hours for the year in each department, (b) the departmental factory overhead rates for both departments, and (c) the factory overhead allocated per unit of each product using the department factory overhead allocation rates using direct labor hours as the base.

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours. Determine the overhead from both production departments allocated to each unit of Product A if Blue Ridge Marketing Inc. uses a multiple department rate system.

The Anazi Leather Company manufactures leather handbags and moccasins.  The company has been using the factory overhead rate method but has decided to evaluate the multiple production department factory overhead rate to allocate factory overhead.  The factory overhead estimated per unit together with direct materials and direct labor will help determine selling prices. Handbags = 60,000 units, 3 hours of direct labor Moccasins= 40,000 units, 2 hours of direct labor Total budgeted factory overhead cost = $360,000 The company has two different production departments: Cutting and Sewing.  The Cutting Department has a factory overhead budget of $80,000.  Each unit will require 1 direct labor hour or a total of 100,000 direct labor hours. The Sewing Department estimates factory overhead in the amount of  $280,000.  Handbags require 2 hours of sewing time and Moccasins require 1 hour for a total of 160,000 labor hours. Calculate the total factory overhead to be allocated to each product using direct labor hours.

Blackwelder Factory produces two similar products - small lamps and desk lamps. The total plant overhead budget is $640,000 with 400,000 estimated direct labor hours. It is further estimated that small lamp production will require 275,000 direct labor hours and desk lamp production will need 125,000 direct labor hours. Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will Blackwelder Factory allocate to desk lamp production if actual direct hours for the period is 118,000?

The Beauty Beyond Words Salon uses an activity-based costing system in its beauty salon to determine the cost of services. The salon has determined the costs of services by activity as follows: Calculate the cost of services for a highlight.

Managers depend on product costing to make decisions regarding continuing operations and product mix.

The Sawtooth Leather Company manufactures leather handbags and moccasins. For simplicity, the company has decided to use a single plantwide factory overhead rate method to allocate factory overhead. Calculate the amount of factory overhead to be allocated to each unit using direct labor hours. Handbags = 60,000 units, 2 hours of direct labor Moccasins= 40,000 units, 3 hours of direct labor Total budgeted factory overhead cost = $360,000

Tulip Company produces two products, T and U. The indirect labor costs include the following two items: The following activity-base usage and unit production information is available for the two products: (a) Determine the single plantwide factory overhead rate, using direct labor hours as the activity base. (b) Determine the factory overhead cost per unit for Products T and U, using the single plantwide factory overhead rate. (c) Determine the activity rate for plant supervision and setup labor, assuming that the activity base for supervision is direct labor hours and the activity base for setup labor is number of setups. (d) Determine the factory overhead cost per unit for Products T and U, using activity-based costing. (e) Why is the factory overhead cost per unit different for the two products under the two methods?

The Dawson Company manufactures small lamps and desk lamps. The following shows the activities per product and the total overhead information: Calculate the total factory overhead to be charged to desk lamps.

The Skagit Company manufactures Hooks and Nooks. The following shows the activities per product and total activity information: Calculate the total factory overhead to be charged to Nooks.

Service companies can effectively use single facility-wide overhead costing to compute product (service) costs.

The Kaumajet Factory produces two products - table lamps and desk lamps. It has two separate departments - Finishing and Production. The overhead budget for the Finishing Department is $550,000, using 500,000 direct labor hours. The overhead budget for the Production Department is $400,000 using 80,000 direct labor hours. If the budget estimates that a table lamp will require 2 hours of finishing and 1 hours of production, what is the total amount of factory overhead the Kaumajet Factory will allocate to table lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours, if 75,000 units are produced?

Managers depend on accurate factory overhead allocation to make decisions regarding product mix and product price.

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Determine the activity rate for product development per change.

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours. Determine the overhead in the Finishing Department for each unit of Product A if Blue Ridge Marketing Inc. uses a multiple department rate system.

Activity-based costing for selling and administrative expenses can also be beneficial in allocating expenses to various products. Which of the following is the best allocation base for help desk costs?