70.2K

Verified Solution

Link Copied!

The following information applies to the questions displayed below.]

Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow:

	Direct Labor-Hours per unit	Annual Production
Rims	0.30	26,000 units
Posts	0.50	70,000 units

Additional information about the company follows:

1. Rims require $15 in direct materials per unit, and Posts require $11.
2. The direct labor wage rate is $15 per hour.
3. Rims are more complex to manufacture than Posts and they require special equipment.
4. The ABC system has the following activity cost pools:

		Estimated Activity
Activity Cost Pool	Activity Measure	Estimated Overhead Cost		Rims	Posts	Total
Machine setups	Number of setups	$	32,900	60	140	200
Special processing	Machine-hours	$	114,800	4,000	0	4,000
General factory	Direct labor-hours	$	1,404,000	6,000	72,000	78,000

c.A security guard patrols the company grounds after normal working hours.

d.Purchase orders are issued for materials to be used in production.

e.Modifications are made to product designs.

f.New employees are hired by the personnel office.

g.Machine settings are changed between batches of different products.

h.Parts inventories are maintained in the storeroom. (Each product requires its own unique parts.)

i. Insurance costs are incurred on the

Required:

1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

	Activity Cost Pool Activity Rate Machine setups per setup Special processing per MH General factory per DLH

companys

2. Determine the unit product cost of each product according to the ABC system. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)

	Unit product cost of Rims Unit product cost of Posts

facilities.

Question 2)

Med Max buys surgical supplies from a variety of manufacturers and then resells and delivers these supplies to dozens of hospitals. In the face of declining profits, Med Max decided to implement an activity-based costing system to improve its understanding of the costs incurred to serve each hospital. The company broke its selling and administrative expenses into four activities as shown below:

Activity Cost Pool	Activity Measure	Total Cost		Total Activity
Customer deliveries	Number of deliveries	$	325,600	4,400	deliveries
Manual order processing	Number of manual orders		234,600	3,400	orders
Electronic order processing	Number of electronic orders		183,260	11,900	orders
Line item picking	Number of line items picked		408,000	340,000	line items
Total selling and administrative expenses		$	1,151,460

Med Max gathered the data below for two of the many hospitals that it servesCity General and County General:

	Activity
Activity Measure	City General	County General
Number of deliveries	15	30
Number of manual orders	0	60
Number of electronic orders	15	0
Number of line items picked	110	270

Required:

1. Compute the activity rate for each activity cost pool.

Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)

	Activity Cost Pool Activity Rate Customer deliveries per delivery Manual order processing per manual order Electronic order processing per electronic order Line item picking per line item picked

2. Compute the total activity costs that would be assigned to City General and County General. (Do not round intermediate calculations.)

	ABC Cost Activity Cost Pool City General County General Customer deliveries Manual order processing Electronic order processing Line item picking Total activity costs

te the total activity costs that would be assigned to City General and County General.

Question 3)

Ginos Restaurant is a popular restaurant in Boston, Massachusetts. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based costing study. The intern, in consultation with the owner, identified the following major activities:

Activity Cost Pool	Activity Measure
Serving a party of diners	Number of parties served
Serving a diner	Number of diners served
Serving drinks	Number of drinks ordered

A group of diners who ask to sit at the same table is counted as a party. Some costs, such as the costs of cleaning linen, are the same whether one person is at a table or the table is full. Other costs, such as washing dishes, depend on the number of diners served.

Data concerning these activities are shown below:

	Serving a Party		Serving a Diner		Serving Drinks		Total
Total cost	$39,600		$207,000		$72,000		$318,600
Total activity	6,000	parties	30,000	diners	60,000	drinks

Prior to the activity-based costing study, the owner knew very little about the costs of the restaurant. She knew that the total cost for the month was $318,600 and that 30,000 diners had been served. Therefore, the average cost per diner was $10.62 ($318,600 30,000 diners = $10.62 per diner).

Required:

1. Compute the activity rates for each of the three activities.

2. According to the activity-based costing system, what is the total cost of serving each of the following parties of diners?

a. A party of four diners who order three drinks in total.

b. A party of two diners who do not order any drinks.

c. A lone diner who orders two drinks.

3. Convert the total costs you computed in part (2) above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties?

a. A party of four diners who order three drinks in total.

b. A party of two diners who do not order any drinks.

c. A lone

• Required 1
• Required 2
• Required 3

Compute the activity rates for each of the three activities. (Round your answers to 2 decimal places.)

Convert the total costs you computed in part (2) above to costs per diner. In other words, what is the average cost per diner for serving each of the following parties? (Round your intermediate calculations and final answers to 2 decimal places.)

	Average Cost a. A party of four diners who order three drinks in total per diner b. A party of two diners who do not order any drinks per diner c. A lone diner who orders two drinks per diner

	Cost per Unit of Activity Serving a Party per party Serving a Diner per diner Serving Drinks per drink

the di

According to the activity-based costing system, what is the total cost of serving each of the following parties of diners? (Round your intermediate calculations and final answers to 2 decimal places.)

	Total a. A party of four diners who order three drinks in total b. A party of two diners who do not order any drinks c. A lone diner who orders two drinks

ner who orders two drinks.

Answer & Explanation Solved by verified expert

See Answer