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    Chapter 3 Exercises - ABC System

    Uploaded by

    Mandy Khoury
    The document contains four sections that provide overhead cost allocation information for different companies. Section 1 details overhead cost pools and activity levels for Gregory Enterprises to allocate overhead to the Mossman Job. Section 2 provides activity cost data for Luzent Manufacturing to allocate overhead to standard and deluxe products. Section 3 gives information on activity costs for All Wood Corporation to allocate overhead between dining chairs and tables using traditional and activity-based costing. Section 4 provides budget and actual job cost data for the Mercer Company to calculate overhead rates and allocate overhead to Job 289.

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    Chapter 3 Exercises - ABC System

    Uploaded by

    Mandy Khoury
    58 views2 pages
    The document contains four sections that provide overhead cost allocation information for different companies. Section 1 details overhead cost pools and activity levels for Gregory Enterprises to allocate overhead to the Mossman Job. Section 2 provides activity cost data for Luzent Manufacturing to allocate overhead to standard and deluxe products. Section 3 gives information on activity costs for All Wood Corporation to allocate overhead between dining chairs and tables using traditional and activity-based costing. Section 4 provides budget and actual job cost data for the Mercer Company to calculate overhead rates and allocate overhead to Job 289.

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    The document contains four sections that provide overhead cost allocation information for different companies. Section 1 details overhead cost pools and activity levels for Gregory Enterprises to allocate overhead to the Mossman Job. Section 2 provides activity cost data for Luzent Manufacturing to allocate overhead to standard and deluxe products. Section 3 gives information on activity costs for All Wood Corporation to allocate overhead between dining chairs and tables using traditional and activity-based costing. Section 4 provides budget and actual job cost data for the Mercer Company to calculate overhead rates and allocate overhead to Job 289.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    58 views2 pages

    Chapter 3 Exercises - ABC System

    Uploaded by

    Mandy Khoury
    The document contains four sections that provide overhead cost allocation information for different companies. Section 1 details overhead cost pools and activity levels for Gregory Enterprises to allocate overhead to the Mossman Job. Section 2 provides activity cost data for Luzent Manufacturing to allocate overhead to standard and deluxe products. Section 3 gives information on activity costs for All Wood Corporation to allocate overhead between dining chairs and tables using traditional and activity-based costing. Section 4 provides budget and actual job cost data for the Mercer Company to calculate overhead rates and allocate overhead to Job 289.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    You are on page 1of 2

    1. Gregory Enterprises has identified three cost pools to allocate overhead costs.

    The following estimates are


    provided for the coming year:

    Cost Pool Overhead Costs Cost driver Activity level


    Supervision of direct labor $320,000 Direct labor-hours 800,000
    Machine maintenance $120,000 Machine-hours 960,000
    Facility rent $200,000 Square feet of area 100,000
    Total overhead costs $640,000

    The accounting records show the Mossman Job consumed the following resources:

    Cost driver Actual level


    Direct labor-hours 200
    Machine-hours 1,600
    Square feet of area 50
    a. Using the ABC approach what is the MOH allocated to the job?
    b. If the company uses machine hours as the only cost allocation base, calculate MOH allocated to
    the Mossman Job.

    2. The following data relates to Luzent Manufacturing:


    Activity Cost Driver Cost Total Standard Deluxe
    Setups # of setups $ 500,000 500 400 100
    Machine-related # machine hours $4,400,000 60,000 30,000 30,000
    Packing # shipments $ 5,000,000 250,000 50,000 200,000

    What is MOH allocated to the Deluxe and Standard product?

    3. All Wood Corporation manufactures dining chairs and tables. The following information is
    available:
    Dining Chairs Tables Total Cost
    Machine setups 200 600 $36,000
    Inspections 250 470 $54,000
    Labor hours 2,600 2,400

    All Wood is considering switching from one overhead rate based on labor hours to activity-based
    costing.
    Instructions
    a. Calculate the total cost allocated to each product using a traditional approach.
    b. Calculate the total cost allocated to each product using ABC system.
    c. Comment on your findings.

    4. The Mercer Company uses a job-costing system at its Farmington, Missouri, plant. The plant
    has a Machining Department and a finishing Department. Mercer uses normal costing with two
    direct-cost categories (direct materials and direct manufacturing labor) and two manufacturing
    overhead cost pools (the Machining department, with machine-hours as the allocation base, and
    the finishing department, with direct manufacturing labor costs as the allocation base). The 2009
    budget for the plant is as follows:
    Machining Department Finishing Department
    Manufacturing overhead costs $12,000,000 $10,000,000
    Direct manufacturing labor costs $ 1,000,000 $ 5,000,000
    Direct manufacturing labor-hours 40,000 200,000
    Machine-hours 250,000 55,000

    You are required to:

    1- What is the budgeted overhead rate in the Machining Department? In the Finishing
    Department.
    2- During the month of January, the job-cost record for Job 289 shows the following:
    Machining Department Finishing Department
    Manufacturing overhead costs $15,000 $ 4,000
    Direct manufacturing labor costs $650 $ 1,400
    Direct manufacturing labor-hours 35 65
    Machine-hours 140 15

    Compute the total manufacturing overhead allocated to Job 289.

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