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Lesson 3. Abc System Sample Problem

Hazel Company uses activity-based costing and produces coats and hats. There are three activity cost pools with estimated total costs and expected activities for coats and hats. The costs per unit for coats is approximately $6.60 and for hats is approximately $15.90 based on allocating the activity costs to each product based on expected activities.

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Chengg Jainar
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792 views4 pages

Lesson 3. Abc System Sample Problem

Hazel Company uses activity-based costing and produces coats and hats. There are three activity cost pools with estimated total costs and expected activities for coats and hats. The costs per unit for coats is approximately $6.60 and for hats is approximately $15.90 based on allocating the activity costs to each product based on expected activities.

Uploaded by

Chengg Jainar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Hazel Company uses activity-based costing. The company produces two products: coats and hats.

The
annual production and sales volume of coats is 8,000 units and of hats is 6,000 units. There are three
activity cost pools with the following expected activities and estimated total costs:

Activity Estimated Expected Expected


Cost Pool Cost Activity Activity
Coats Hats Total
Activity 1 $20,000 100 400 500
Activity 2 $37,000 800 200 1,000
Activity 3 $91,200 800 3,000 3,800

87. Refer to Hazel Company. Using ABC, the cost per unit of coats is approximately:

a. $2.40 c. $ 6.60
b. $3.90 d. $10.59
ACTIVITY COST ALLOCATION COST PER UNIT
1 20,000*100/500 = 4,000/8,000 0.50
2 37,000*800/1000 = 29,600/8,000 3.70
3 91,200*800/3,800 =19,200/8,000 2.40
6.60

88. Refer to Hazel Company. Using ABC, the cost per unit of hats is approximately:

a. $2.40 c. $12.00
b. $3.90 d. $15.90
ACTIVITY COST ALLOCATION COST PER UNIT
1 20,000*400/500 =16,000/6000 2.67
2 37,000*200/1000 = 7,400/6000 1.23
3 91,200*3000/3800 72,000/6000 12
15.90
Jason P. Savings and Loan had the following activities, traceable costs, and
physical flow of driver units:

Traceable Physical flow of


Activities Costs Driver Units

Open new accounts $50,000 1,000 accounts 50,000/1000 = 50


Process deposits 36,000 400,000 deposits 36,000/400,000=0.09
Process withdrawals 15,000 200,000 withdrawals 15,000/200,000=0.075
Process loan applications 27,000 900 applications 27,000/900= 30

The above activities are used by the Jennings branch and the Crowley branch:

Jennings Crowley

New accounts 200 400


Deposits 40,000 20,000
Withdrawals 15,000 18,000
Loan applications 100 160

80. Refer to Jason P. Savings and Loan. What is the cost per driver unit for new account activity?
a. $0.09 c. $30.00
b. $0.075 d. $50.00

81. Refer to Jason P. Savings and Loan What is the cost per driver unit for the deposit activity?

a. $0.09 c. $30.00
b. $0.075 d. $50.00

82. Refer to Jason P. Savings and Loan. What is the cost per driver unit for the withdrawal activity?

a. $0.09 c. $30.00
b. $0.075 d. $50.00

83. Refer to Jason P. Savings and Loan. What is the cost per driver unit for the loan application activity?

a. $0.09 c. $30.00
b. $0.075 d. $50.00

84. Refer to Jason P. Savings and Loan. How much of the loan application cost will be assigned to the
Jennings branch?
a. $3,000 c. $ 7,800
b. $4,800 d. $27,000

85. Refer to Jason P. Savings and Loan. How much of the deposit cost will be assigned to the Crowley
branch?
a. $1,800 c. $ 5,400
b. $3,600 d. $36,000
86. Refer to Jason P. Savings and Loan. How much of the new account cost will be assigned to the Crowley
branch?
a. $10,000 c. $30,000
b. $20,000 d. $50,000

Heirloom Company. manufactures hand-made pine storage boxes for a variety of clients. As production
manager, you have developed the following value chart:

Operation Average Number of Days


Receiving materials 1
Storing materials 2
Handling materials 3
Cutting/measuring materials 6
Assembling materials 4
Building boxes 7
Attaching hinges 2
Inspection 1

a. Determine the value-added activities and their total time. 19


b. Determine the non-value-added activities and their total time. 7
c. Calculate the manufacturing cycle efficiency. 73%

Value added time


Cutting/measuring materials 6
Assembling materials 4
Building boxes 7
Attaching hinges 2
19
Non-value added time
Receiving material 1
Storing materials 2
Handling 3
Inspection 1
7

MCE= VALUE ADDED/TOTAL CYCLE TIME


MCE = 19/26
MCE = 0.73 or 73%

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