Cost Management: A Strategic Emphasis 7th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 30

ABC and Practical Capacity; Spreadsheet Application The XYZ Manufacturing Company produces two products, S-101 and C-110. You have obtained the following information regarding the annual manufacturing support (i.e., factory overhead) costs associated with the manufacturing process used to produce these two products:

Required
1. Prepare an Excel spreadsheet that provides activity-based costing (ABC) cost-allocation rates based on budgeted activity units for the coming year. (a) What is the budgeted manufacturing support cost per unit of S-101 (b) What is the budgeted manufacturing support cost per unit of C-110
2. Using your spreadsheet, recalculate the activity-based costing (ABC) cost-allocation rates, this time based on practical capacity as the denominator activity level. (a) What is the budgeted manufacturing support cost per unit of S-101 (b) What is the budgeted manufacturing support cost per unit of C-110
3. Compute, for each cost pool listed on the previous page, the difference between the budgeted cost for the year and the total cost allocated to production. How do you interpret these variances (differences)