{"id":87,"date":"2021-03-18T12:43:46","date_gmt":"2021-03-18T12:43:46","guid":{"rendered":"https:\/\/tutorsnest.com\/blog\/?p=87"},"modified":"2021-03-18T12:43:48","modified_gmt":"2021-03-18T12:43:48","slug":"accounting-q-a","status":"publish","type":"post","link":"https:\/\/tutorsnest.com\/blog\/accounting-q-a\/","title":{"rendered":"Accounting Q and A"},"content":{"rendered":"\n

Appendix Ex 25-26 Variable cost concept of product pricing<\/strong><\/p>\n\n\n\n

Based on the data presented in Exercise 25-17, assume that Smart Stream Inc. uses the variable cost concept of applying the cost-plus approach to product pricing.<\/p>\n\n\n\n

a. Determine the variable costs and the variable cost amount per unit for the production and sale of 10,000 cellular phones.<\/p>\n\n\n\n

b. Determine the variable cost markup percentage (rounded to two decimal places) for cellular phones.<\/p>\n\n\n\n

c. Determine the selling price of cellular phones. Round to the nearest dollar.<\/p>\n\n\n\n

Answer:<\/p>\n\n\n\n

\"https:\/\/3.bp.blogspot.com\/-05QUy77PoOk\/W-V-YDgfYWI\/AAAAAAAAD1M\/I80SX0W0bmgpiXzNRPZzCeQScVzTcHfiwCK4BGAYYCw\/s400\/IMG_4627.jpeg\"\/<\/figure>\n\n\n\n

<\/a><\/p>\n\n\n\n

a. Total variable costs: ($240 \u00d7 10,000 units)\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 $2,400,000 <\/p>\n\n\n\n

Cost amount per unit:  $2,400,000 \u00f7 10,000 units = $240 <\/p>\n\n\n\n

b. Markup percentage = <\/p>\n\n\n\n

Markup percentage = <\/p>\n\n\n\n

Markup percentage = <\/p>\n\n\n\n

Desired Profit + Total Fixed Costs <\/p>\n\n\n\n

Total Costs <\/p>\n\n\n\n

EX 26-2 Average rate of return\u2014cost savings<\/strong><\/p>\n\n\n\n

Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $132,000 with a $16,000 residual value and a 10-year<\/p>\n\n\n\n

life. The equipment will replace one employee who has an average wage of $34,000 per year. In addition, the equipment will have operating and energy costs of $5,380 per year.<\/p>\n\n\n\n

Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment.<\/p>\n\n\n\n

Answer:<\/p>\n\n\n\n

\"https:\/\/3.bp.blogspot.com\/-thUInEbisy0\/W-Y6eHqiltI\/AAAAAAAAD1k\/vmwhHMWAIloRrLRE06-R2YfsSxWCH8qfgCK4BGAYYCw\/s400\/IMG_4631.jpeg\"\/<\/figure>\n\n\n\n

<\/a><\/p>\n\n\n\n

Average Rate <\/p>\n\n\n\n

of Return   =<\/p>\n\n\n\n

= <\/p>\n\n\n\n

Average Annual Income <\/p>\n\n\n\n

Average Investment <\/p>\n\n\n\n

Average Savings* \u2013 Annual Depreciation \u2013 Additional Operating Costs <\/p>\n\n\n\n

(Beginning Cost + Residual Value) \u00f7 2 <\/p>\n\n\n\n

$34,000 \u2013 [($132,000 \u2013 $16,000) \u00f7 10 years] \u2013 $5,380 <\/p>\n\n\n\n

= <\/p>\n\n\n\n

($132,000 + $16,000) \u00f7 2 <\/p>\n\n\n\n

= $17,020 <\/p>\n\n\n\n

$74,000 <\/p>\n\n\n\n

=  23% <\/p>\n\n\n\n

* The effect of the savings in wages expense is an increase in income. <\/p>\n\n\n\n

Accounting Q and A<\/h1>\n\n\n\n

EX 26-2 Average rate of return\u2014cost savings<\/h3>\n\n\n\n

Midwest Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of $132,000 with a $16,000 residual value and a 10-year<\/p>\n\n\n\n

life. The equipment will replace one employee who has an average wage of $34,000 per year. In addition, the equipment will have operating and energy costs of $5,380 per year.<\/p>\n\n\n\n

Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment.<\/p>\n\n\n\n

Answer:<\/p>\n\n\n\n

\"https:\/\/3.bp.blogspot.com\/-thUInEbisy0\/W-Y6eHqiltI\/AAAAAAAAD1k\/vmwhHMWAIloRrLRE06-R2YfsSxWCH8qfgCK4BGAYYCw\/s400\/IMG_4631.jpeg\"\/<\/figure>\n\n\n\n

<\/a><\/p>\n\n\n\n

Average Rate <\/p>\n\n\n\n

of Return   =<\/p>\n\n\n\n

= <\/p>\n\n\n\n

Average Annual Income <\/p>\n\n\n\n

Average Investment <\/p>\n\n\n\n

Average Savings* \u2013 Annual Depreciation \u2013 Additional Operating Costs <\/p>\n\n\n\n

(Beginning Cost + Residual Value) \u00f7 2 <\/p>\n\n\n\n

$34,000 \u2013 [($132,000 \u2013 $16,000) \u00f7 10 years] \u2013 $5,380 <\/p>\n\n\n\n

= <\/p>\n\n\n\n

($132,000 + $16,000) \u00f7 2 <\/p>\n\n\n\n

= $17,020 <\/p>\n\n\n\n

$74,000 <\/p>\n\n\n\n

=  23% <\/p>\n\n\n\n

* The effect of the savings in wages expense is an increase in income. <\/p>\n\n\n\n

EX 26-1 Average rate of return<\/h3>\n\n\n\n

The following data are accumulated by Bio Metrics Inc. in evaluating two competing capital investment proposals:


                                      Testing Equipment | Vehicle
Amount of investment                 $104,000 | $32,000
Useful life                                        6 years | 8 years
Estimated residual value                           0 |       0
Estimated total income over the
useful life                                       $18,720 | $15,360

Determine the expected average rate of return for each proposal.


Answer:
<\/a>

Testing 
Equipment Vehicle 
$18,720 \u00f7 6\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 $3,120 
$15,360 \u00f7 8\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 $1,920 
Average investment: 
($104,000 + $0) \u00f7 2\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026   $52,000 
($32,000 + $0) \u00f7 2\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 $16,000 
Average rate of return: 
$3,120 \u00f7 $52,000\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 6% 
$1,920 \u00f7 $16,000\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 12% <\/p>\n\n\n\n

Appendix Ex 25-26 Variable cost concept of product pricing<\/h3>\n\n\n\n

Based on the data presented in Exercise 25-17, assume that Smart Stream Inc. uses the variable cost concept of applying the cost-plus approach to product pricing.<\/p>\n\n\n\n

a. Determine the variable costs and the variable cost amount per unit for the production and sale of 10,000 cellular phones.<\/p>\n\n\n\n

b. Determine the variable cost markup percentage (rounded to two decimal places) for cellular phones.<\/p>\n\n\n\n

c. Determine the selling price of cellular phones. Round to the nearest dollar.<\/p>\n\n\n\n

Answer:<\/p>\n\n\n\n

\"https:\/\/3.bp.blogspot.com\/-05QUy77PoOk\/W-V-YDgfYWI\/AAAAAAAAD1M\/I80SX0W0bmgpiXzNRPZzCeQScVzTcHfiwCK4BGAYYCw\/s400\/IMG_4627.jpeg\"\/<\/figure>\n\n\n\n

<\/a><\/p>\n\n\n\n

a. Total variable costs: ($240 \u00d7 10,000 units)\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 $2,400,000 <\/p>\n\n\n\n

Cost amount per unit:  $2,400,000 \u00f7 10,000 units = $240 <\/p>\n\n\n\n

b. Markup percentage = <\/p>\n\n\n\n

Markup percentage = <\/p>\n\n\n\n

Markup percentage = <\/p>\n\n\n\n

Desired Profit + Total Fixed Costs <\/p>\n\n\n\n

Total Costs <\/p>\n\n\n\n

$360,000* + $350,000 + $140,000 <\/p>\n\n\n\n

$2,400,000 <\/p>\n\n\n\n

$850,000 <\/p>\n\n\n\n

$2,400,000 <\/p>\n\n\n\n

Markup percentage =   35.42% <\/p>\n\n\n\n

* $1,200,000 \u00d7 30% = $360,000 <\/p>\n\n\n\n

c. Cost amount per unit\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 $240 <\/p>\n\n\n\n

 Markup ($240 \u00d7 35.42%)\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026     85 <\/p>\n\n\n\n

 Selling price\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 $325 <\/p>\n\n\n\n

Appendix Ex 25-25 Total cost concept of product pricing<\/h3>\n\n\n\n

Based on the data presented in Exercise 25-17, assume that Smart Stream Inc. uses the total cost concept of applying the cost-plus approach to product pricing.<\/p>\n\n\n\n

a. Determine the total costs and the total cost amount per unit for the production and sale of 10,000 cellular phones.<\/p>\n\n\n\n

b. Determine the total cost markup percentage (rounded to two decimal places) for cellular phones.<\/p>\n\n\n\n

c. Determine the selling price of cellular phones. Round to the nearest dollar.<\/p>\n\n\n\n

Answer:<\/p>\n\n\n\n

\"https:\/\/2.bp.blogspot.com\/-QhKDZXJ2DNA\/W-V-HZAZBCI\/AAAAAAAAD1A\/mJ3A8MrTOPEzE5xUbcUNzWmGgjGQxSTywCK4BGAYYCw\/s400\/IMG_4626.jpeg\"\/<\/figure>\n\n\n\n

<\/a><\/p>\n\n\n\n

a. Total costs: <\/p>\n\n\n\n

Variable ($240 \u00d7 10,000 units)\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 $2,400,000 <\/p>\n\n\n\n

Fixed ($350,000 + $140,000)\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026   490,000 <\/p>\n\n\n\n

Total\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 $2,890,000 <\/p>\n\n\n\n

Cost amount per unit:  $2,890,000 \u00f7 10,000 units = $289 <\/p>\n\n\n\n

b. Markup percentage = <\/p>\n\n\n\n

Markup percentage = <\/p>\n\n\n\n

Desired Profit <\/p>\n\n\n\n

Total Costs <\/p>\n\n\n\n

$360,000* <\/p>\n\n\n\n

$2,890,000 <\/p>\n\n\n\n

Markup percentage = 12.46% (rounded) <\/p>\n\n\n\n

* $1,200,000 \u00d7 30% = $360,000 <\/p>\n\n\n\n

c. Cost amount per unit\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 $289 <\/p>\n\n\n\n

Markup ($289 \u00d7 12.46%)\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026     36 <\/p>\n\n\n\n

Selling price\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 $325 <\/p>\n\n\n\n

Ex 25-24 Activity rates and product costs using activity-based costing<\/h3>\n\n\n\n

BriteLite Inc. manufactures entry and dining room lighting fixtures. Five activities are used in manufacturing the fixtures. These activities and their associated activity costs and activity bases are as follows:<\/p>\n\n\n\n

\"https:\/\/1.bp.blogspot.com\/-_BxjmG7EXcg\/W-V9mFsVzRI\/AAAAAAAAD0o\/O1t_dRN4wVwnJYUEKSVEz774sVEiMwUbQCK4BGAYYCw\/s400\/IMG_4600.jpeg\"\/<\/figure>\n\n\n\n

<\/a><\/p>\n\n\n\n

Activity <\/p>\n\n\n\n

Activity Costs  <\/p>\n\n\n\n

(Budgeted) <\/p>\n\n\n\n

Activity Base<\/p>\n\n\n\n

Casting $42,000 Machine hours<\/p>\n\n\n\n

Assembly   13,500 Direct labor hours<\/p>\n\n\n\n

Inspecting   5,800 Number of inspections<\/p>\n\n\n\n

Setup   16,800 Number of setups<\/p>\n\n\n\n

Materials handling   3,600 Number of loads<\/p>\n\n\n\n

Corporate records were obtained to estimate the amount of activity to be used by the two products. The estimated activity-base usage quantities and units produced for each product and in total are provided in the table below.<\/p>\n\n\n\n

Activity Base            | Entry | Dining | Total<\/p>\n\n\n\n

Machine hours            |   800 |    600 | 1,400<\/p>\n\n\n\n

Direct labor hours       |   500 |    400 |   900<\/p>\n\n\n\n

Number of inspections.   |   140 |    150 |   290<\/p>\n\n\n\n

Number of setups         |    80 |     60 |   140<\/p>\n\n\n\n

Number of loads          |    50 |     40 |    90<\/p>\n\n\n\n

Units produced           | 1,200 |    500 | 1,700<\/p>\n\n\n\n

a. Determine the activity rate for each activity.<\/p>\n\n\n\n

b. Use the activity rates in (a) to determine the total and per unit activity costs associated with each product.<\/p>\n\n\n\n

Answer:<\/p>\n\n\n\n

\"https:\/\/3.bp.blogspot.com\/-s3VdUkgB0cg\/W-V9zZBeobI\/AAAAAAAAD0w\/XIfBWYZZ9ZMwGBFy4zgh-Et5zAI1ZeK3ACK4BGAYYCw\/s640\/IMG_4625.jpeg\"\/<\/figure>\n\n\n\n

<\/a><\/p>\n\n\n\n

Estimated Total <\/p>\n\n\n\n

Activity Activity- Activity <\/p>\n\n\n\n

Cost \u00f7 Base Usage = Rate <\/p>\n\n\n\n

Casting $42,000 1,400  mh $30  \/mh <\/p>\n\n\n\n

Assembly 13,500 900  dlh $15  \/dlh <\/p>\n\n\n\n

Inspecting 5,800 290  insp. $20  \/insp. <\/p>\n\n\n\n

Setup 16,800 140  setups $120  \/setup <\/p>\n\n\n\n

Materials handling 3,600 90  loads $40  \/load <\/p>\n\n\n\n

Activity <\/p>\n\n\n\n

Entry Lighting Fixtures Dining Room Lighting Fixtures <\/p>\n\n\n\n

Activity- <\/p>\n\n\n\n

Base Activity Activity <\/p>\n\n\n\n

Usage \u00d7 Rate = Cost <\/p>\n\n\n\n

Casting 800  mh $30  \/mh $24,000 600  mh $30  \/mh $18,000 <\/p>\n\n\n\n

Assembly 500  dlh $15  \/dlh 7,500 400  dlh $15  \/dlh 6,000 <\/p>\n\n\n\n

Inspecting 140  insp. $20  \/insp. 2,800 150  insp. $20  \/insp. 3,000 <\/p>\n\n\n\n

Setup 80  setups $120  \/setup 9,600 60  setups $120  \/setup 7,200 <\/p>\n\n\n\n

Materials handling 50  loads $40  \/load 2,000 40  loads $40  \/load 1,600 <\/p>\n\n\n\n

Total activity cost $45,900  $35,800 <\/p>\n\n\n\n

\u00f7 Number of units \u00f7   1,200  \u00f7 500 <\/p>\n\n\n\n

Activity cost per unit $  38.25  $  71.60 <\/p>\n\n\n\n

Ex 25-23 Activity-based costing<\/h3>\n\n\n\n

Zeus Industries manufactures two types of electrical power units, custom and standard, which involve four factory overhead activities\u2014production setup, procurement, quality control, and materials management. An activity analysis of the overhead revealed the following estimated activity costs and activity bases for these activities:<\/p>\n\n\n\n

\"https:\/\/1.bp.blogspot.com\/-Q_HqxWe2d9E\/W-V8l0mG1SI\/AAAAAAAAD0Q\/lIp1z4fU6cUIkuVYkmmSiyY_PW1yW8VpQCK4BGAYYCw\/s400\/IMG_4599.jpeg\"\/<\/figure>\n\n\n\n

<\/a><\/p>\n\n\n\n

Activity Activity Cost Activity Base<\/p>\n\n\n\n

Production setup $ 44,000 Number of setups<\/p>\n\n\n\n

Procurement 13,500 Number of purchase orders (PO)<\/p>\n\n\n\n

Quality control 97,500 Number of inspections<\/p>\n\n\n\n

Materials management 84,000 Number of components<\/p>\n\n\n\n

Total$239,000p<\/p>\n\n\n\n

The activity-base usage quantities for each product are as follows:<\/p>\n\n\n\n

 Setups<\/p>\n\n\n\n

Purchase <\/p>\n\n\n\n

Orders Inspections Components Unit Volume<\/p>\n\n\n\n

Custom 290 760 1,200 500 2,000<\/p>\n\n\n\n

Standard 110 140   300 200 2,000<\/p>\n\n\n\n

Total 400 900 1,500 700 4,000<\/p>\n\n\n\n

a. Determine an activity rate for each activity.<\/p>\n\n\n\n

b. Assign activity costs to each product, and determine the unit activity cost, using the activity rates from part (a).<\/p>\n\n\n\n

c. Assume that each product required one direct labor hour per unit. Determine the per unit cost if factory overhead is allocated on the basis of direct labor hours.<\/p>\n\n\n\n

d.  Explain why the answers in parts (b) and (c) are different.<\/p>\n\n\n\n

Answer:<\/p>\n\n\n\n

\"https:\/\/4.bp.blogspot.com\/-JUFErqJAB2I\/W-V8y-xNy-I\/AAAAAAAAD0Y\/Bp7IQE7gwng2ZPwz1oJXC1b8HyHdnOy1wCK4BGAYYCw\/s640\/IMG_4624.jpeg\"\/<\/figure>\n\n\n\n

<\/a><\/p>\n\n\n\n

Production Quality <\/p>\n\n\n\n

Materials <\/p>\n\n\n\n

a. Setup Procurement Control <\/p>\n\n\n\n

Activity cost\u2026\u2026 $44,000 $13,500 $97,500 <\/p>\n\n\n\n

\u00f7 Activity base\u2026   400   900     1,500 <\/p>\n\n\n\n

Activity rate\u2026\u2026 $110\/setup   $15\/PO    $65\/inspection <\/p>\n\n\n\n

Management <\/p>\n\n\n\n

$84,000 <\/p>\n\n\n\n

  700 <\/p>\n\n\n\n

 $120\/component <\/p>\n\n\n\n

b. Custom Standard <\/p>\n\n\n\n

Number of setups\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 290 110 <\/p>\n\n\n\n

\u00d7 Rate per setup\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026 $110 $110 <\/p>\n\n\n\n

Number of purchase orders\u2026\u2026\u2026 <\/p>\n\n\n\n

760 <\/p>\n\n\n\n

$  31,900  <\/p>\n\n\n\n

140 <\/p>\n\n\n\n

$12,100 <\/p>\n\n\n\n

\u00d7 Rate per purchase order\u2026\u2026\u2026\u2026 $15  $15  <\/p>\n\n\n\n

  11,400  2,100 <\/p>\n\n\n\n

Number of inspections\u2026\u2026\u2026\u2026\u2026 1,200  300  <\/p>\n\n\n\n

\u00d7 Rate per inspection\u2026\u2026\u2026\u2026\u2026\u2026\u2026    $65  $65  <\/p>\n\n\n\n

  78,000  19,500 <\/p>\n\n\n\n

Number of components\u2026\u2026\u2026\u2026\u2026 500  200  <\/p>\n\n\n\n

\u00d7 Rate per component\u2026\u2026\u2026\u2026\u2026\u2026 $120  $120  <\/p>\n\n\n\n

      60,000    24,000 <\/p>\n\n\n\n

Total product cost\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026  $181,300  $57,700 <\/p>\n\n\n\n

\u00f7 Unit volume\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026    2,000      2,000 <\/p>\n\n\n\n

Unit cost\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026\u2026  $  90.65  $ 28.85 <\/p>\n\n\n\n

c. The factory overhead allocated to each product on the basis of direct labor hours <\/p>\n\n\n\n

would be 50%, since each product has the same 2,000 direct labor hours. The <\/p>\n\n\n\n

factory overhead per direct labor hour for each product is computed as follows: <\/p>\n\n\n\n

$239,000 <\/p>\n\n\n\n

4,000 per direct labor hour <\/p>\n\n\n\n

=  $59.75 per hour <\/p>\n\n\n\n

Since each product requires one direct labor hour, the factory overhead cost per <\/p>\n\n\n\n

unit is also $59.75 for each product. <\/p>\n\n\n\n

d. The factory overhead allocated to the custom power unit is much higher under the <\/p>\n\n\n\n

activity-based approach, compared to the direct labor method. The reason is that <\/p>\n\n\n\n

the setup, procurement, and quality control activities are not related to the number <\/p>\n\n\n\n

of direct labor hours but are instead related to the number of setups, purchase <\/p>\n\n\n\n

orders, and inspections. In addition, the custom product has a more complex design <\/p>\n\n\n\n

(more components) than does the standard product. As a result, the custom product <\/p>\n\n\n\n

will consume more materials management activities than will the standard product. <\/p>\n\n\n\n

Ex 25-22 Activity-based costing<\/h3>\n\n\n\n

CardioTrainer Equipment Company manufactures stationary bicycles and treadmills. The products are produced in the Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two products. These activities and their associated activity rates are as follows:

Activity                        | Activity Rate
Fabrication                   | $22 per machine hour (mh)
Assembly                     | $12 per direct labor hour (dlh)
Setup                            | $40 per setup
Inspecting                    | $18 per inspection
Production scheduling | $8 per production order
Purchasing                   | $5 per purchase order

The activity-base usage quantities and units produced for each product were as follows:

                    Stationary Bicycle | Treadmill
Machine hours                 1,680 | 1,070
Direct labor hours               243 | 131
Setups                                   45 | 20
Inspections                         158 | 94
Production orders                 60 | 32
Purchase orders                  240 | 98
Units produced                   500 | 350

Use the activity rate and usage information to compute the total activity costs and the activity costs per unit for each product.


Answer:
<\/a>
Stationary Bicycle Treadmill 
Activity- 
Base Activity Activity 
Usage \u00d7 Rate = Cost 
Activity- 
Base Activity Activity 
Usage \u00d7 Rate = Cost 
Fabrication 1,680  mh $22  \/mh $36,960 1,070  mh $22  \/mh $23,540 
Assembly 243  dlh $12  \/dlh 2,916 131  dlh $12  \/dlh 1,572 
Setup 45  setups $40  \/setup 1,800 20  setups $40  \/setup 800 
Inspecting 158  insp. $18  \/insp. 2,844 94  insp. $18  \/insp. 1,692 
Production       
scheduling 60  prod. orders $8  \/prod. order 480 32  prod. orders $8  \/prod. order 256 
Purchasing 240  purch. ord. $5  \/purch. ord. 1,200 98  purch. ord. $5  \/purch. ord. 490 
Total $46,200  $28,350 
\u00f7 Number of units \u00f7 500  \u00f7 350 
Activity cost per unit $92.40  $81.00 <\/p>\n","protected":false},"excerpt":{"rendered":"

Answers to tough accounting questions<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[107,110,108,30,109,19],"yoast_head":"\nAccounting Q and A - Tutors Nest<\/title>\n<meta name=\"description\" content=\"Free accounting homework answers\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/tutorsnest.com\/blog\/accounting-q-a\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Accounting Q and A - Tutors Nest\" \/>\n<meta property=\"og:description\" content=\"Free accounting homework answers\" \/>\n<meta property=\"og:url\" content=\"https:\/\/tutorsnest.com\/blog\/accounting-q-a\/\" \/>\n<meta property=\"og:site_name\" content=\"Tutors Nest\" \/>\n<meta property=\"article:author\" content=\"https:\/\/www.facebook.com\/TutorsNest\" \/>\n<meta property=\"article:published_time\" content=\"2021-03-18T12:43:46+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-03-18T12:43:48+00:00\" \/>\n<meta name=\"author\" content=\"Support\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@NestTutors\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Support\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"12 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/tutorsnest.com\/blog\/accounting-q-a\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/tutorsnest.com\/blog\/accounting-q-a\/\"},\"author\":{\"name\":\"Support\",\"@id\":\"https:\/\/tutorsnest.com\/blog\/#\/schema\/person\/739b31e4a49d19e9ce5db2671be8a5d2\"},\"headline\":\"Accounting Q and A\",\"datePublished\":\"2021-03-18T12:43:46+00:00\",\"dateModified\":\"2021-03-18T12:43:48+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/tutorsnest.com\/blog\/accounting-q-a\/\"},\"wordCount\":1999,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/tutorsnest.com\/blog\/#organization\"},\"keywords\":[\"Activity-based costing\",\"addidas strategic marketing plan\",\"best tutoring website\",\"do my homework\",\"get discounts and coupons\",\"website similar to homeworkmarket.com\"],\"articleSection\":[\"Revision area\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/tutorsnest.com\/blog\/accounting-q-a\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/tutorsnest.com\/blog\/accounting-q-a\/\",\"url\":\"https:\/\/tutorsnest.com\/blog\/accounting-q-a\/\",\"name\":\"Accounting Q and A - 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