You are to complete this assignment by the time class starts on the due date (indicated in the syllabus or during class). You are free to use resources or talk with classmates, but all work turned in must be your own. You may type or write/scan and upload to Blackboard, but make sure that I can read everything written down. It is your responsibility to make sure that the correct images have been uploaded.
|ACTIVITY COST POOL||ACTIVITY MEASURE (Cost Driver)|
|Caring for lawn||Square feet of lawn|
|Caring for garden beds – low maintenance||Square feet of low maintenance beds|
|Caring for garden beds – high maintenance||Square feet of high maintenance beds|
|Travel to jobs||Miles|
|Customer billing and service||Number of customers|
The company has already completed its first stage allocations of costs (overhead costs to each activity cost pool) and has summarized its annual costs and activity as follows:
|ACTIVITY COST POOL||ESTIMATED OVERHEAD COST||EXPECTED ACTIVITY|
|Caring for Lawn||$72,000||150,000 sq ft of lawn|
|Caring for garden beds – Low Maintenance||$26,400||20,000 sq ft of low maintenance beds|
|Caring for garden beds – High Maintenance||$41,400||15,000 sq ft of high maintenance beds|
|Travel to jobs||$3,250||12,500 miles|
|Customer billing and service||$8,750||25 customers|
REQUIRED: Compute the activity rate for each of the activity cost pools.
|ACTIVITY COST POOL||ACTIVITY RATES|
|Supporting Direct Labor||$6.00 per direct labor-hour|
|Machine Processing||$4.00 per machine-hour|
|Machine Setups||$50.00 per setup|
|Production Orders||$90.00 per order|
|Shipments||$14.00 per shipment|
|Product Sustaining||$840.00 per product|
Activity data have been applied for the following two products:
|Number of units produced per year||200||2,000|
REQUIRED: Determine the total overhead cost that would be assigned to each of the products listed above in the activity-based costing system.
To shed light on this controversy, the company initiated an activity-based costing study of all of its costs. Data from the activity-based costing system follow:
|Activity Cost Pool||Activity Measure (Cost Driver)||Total Activity|
|Removing Asbestos||Thousands of square feet||800,000 square feet|
|Estimating and Job Setup||Number of Jobs||500 Jobs|
|Working on Nonroutine Jobs||Number of Nonroutine Jobs||100 nonroutine jobs|
|Overhead Costs for the Year|
|Wages and salaries||$300,000|
|Licensing and Insurance||400,000|
|Distribution of Consumption Across Activities|
|Removing Asbestos||Estimating and Job Setup||Working on Nonroutine Jobs||Other||Total|
|Wages and salaries||50%||10%||30%||10%||100%|
|Licensing and Insurance||30%||0%||50%||20%||100%|
*Other includes costs of idle capacity, etc. that is not allocated to any activity cost pool, but just “exists” regardless of the job on hand. Thus, you need the “other” to determine the distribution of overhead costs in each of the activity cost pools, but you do not need to compute an activity rate or take into consideration when determining the cost of a particular job.
REQUIRED (NEXT PAGE)
The activity rate under the activity-based costing system for Activity 3 is closest to:
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