Answered Essay: Managerial Accounting (15th Edition)

Question on Activity Based Costing:

Managerial Accounting (15th Edition)

Chapter 7, Problem 16P

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https://www.chegg.com/homework-help/Managerial-Accounting-15th-edition-chapter-7-problem-16P-solution-9780077522957

Expert Answer

 

Traditional Method
per unit B300 per unit T500 Total
No. of units sold 70000 17500 87500
Sales $20 $1,400,000 $40 $700,000 $2,100,000
Less: Direct Material 6.23 436300 14.38 251700 $688,000
Less: Direct Labor 2.86 200000 5.94 104000 $304,000
Less: Manufacturing Overhead 5.71 400000 11.89 208000 $608,000
(200000*2) (104000*2)
Total 14.80 1036300 32.21 563700
Product Margin $5.20 $363,700 $7.79 $136,300 ans 1
Predetermined overhead rate 2
608000/304000
Activity cost pool Manu. Over Total estimated driver Activity rate B300 Cost allocated T500 Cost allocated
Machining 213500 152500 1.4 90000 126000 62500 87500
Setup 157500 375 420 75 31500 300 126000
Product sustaining cost 120000 2 60000 1 60000 1 60000
Total 217500 273500
No. of units 70000 17500
Overhead cost per unit 3.11 15.63
Activity Based costing
per unit B300 per unit T500 Total
No. of units sold 70000 17500
Sales $20 $1,400,000 $40 $700,000 $2,100,000
Less: Direct Material 6.23 436300 14.38 251700 $688,000
Less: Direct Labor 2.86 200000 5.94 104000 $304,000
Less: Manufacturing Overhead 3.11 217500 15.63 273500
Advertising cost 50000 100000
Total cost 12.20 903800 35.95 729200
Product Margin $7.80 $496,200 $4.05 ($29,200) ans 2
Ans 3
B300 T500
Traditional method Amt % of Total amt Amt Total amt Total
Direct Material 436300 63.4 251700 36.6 688000
Direct Labor 200000 65.8 104000 34.2 304000
Manufacturing Overhead 400000 65.8 208000 34.2 608000
Total 1036300 563700 1600000
Cost not assigned ( S & A expenses) 550000
Total cost 2150000
ABC
Direct cost
Direct Material 436300 63.4 251700 36.6 688000
Direct Labor 200000 65.8 104000 34.2 304000
Advertising expenses 50000 33.3 100000 66.7 150000
Indirect cost
Machining 126000 59.0 87500 41.0 213500
Setups 31500 20.0 126000 80.0 157500
Product sustaining 60000 50.0 60000 50.0 120000
Total cost assigned 903800 729200 1633000
Cost not assigned
Organization sustaining cost 117000
Selling & Adm exp except direct advertising 400000
Total cost 2150000
Calculation of % are
For example direct material
436300/688000*100 63.4 %
251700/688000*100 36.6 %
If any doubt please comment
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