Questions and Answers
What is the per unit cost for Fudge?
155.8033 ± 0.7
What is the plantwide overhead rate using oven hours?
197.8314 ± 0.7
What is the unit cost of a cell phone?
50
Using Activity-Based Costing, what is the total overhead assigned to Fudge?
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Using an activity rate for receiving based on receiving orders, how do you assign receiving costs to the 35mm camera?
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Ignoring Activity-Based Costing and using the plantwide rate based on oven hours, what is the total overhead assigned to Fudge?
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What is the consumption ratio for setups on the digital cameras?
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What is the activity rate for packing based on packing orders?
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Study Notes
Sabroso Chocolate Company Overview
- Two main activities: equipment setup and baking.
- Products: Fudge and Cookies, each with distinct cost structures.
Cost Calculations for Fudge and Cookies
- Fudge costs include Direct Materials & Labor of $432,104 and Assigned Overhead of $878,046.
- Cookies costs include Direct Materials & Labor of $526,703 and Assigned Overhead of $322,353.
- Per unit cost for Fudge calculated as: (Direct Materials + Direct Labor + Assigned Overhead) / Units Produced = $155.80.
Plantwide Overhead Rate
- Total costs for setting up equipment ($252,211) and baking ($978,696).
- Plantwide overhead rate based on oven hours determined as: Total Costs / Total Oven Hours = $197.83.
Unit Cost Calculation for Cell Phones
- Producing 10,000 units incurs $300,000 direct materials and labor, along with activity costs from machine hours ($40 per hour) and setup hours ($100 per hour).
- Unit cost for cell phones calculated as: [$300,000 + ($40 × 2,000) + ($100 × 1,200)] / 10,000 = $50.
Activity-Based Costing for Fudge
- Fudge allocated total overhead using Activity-Based Costing:
- Setup: 4,275 hours × Rate $49 = $209,325
- Oven: 977 hours × Rate $135 = $131,595
- Total overhead assigned to Fudge equals $363,420.
Rizzo Manufacturing Camera Production
- Productions of 35mm and Digital cameras involve machining, setups, receiving orders, and packing.
- Costs associated with activities: Machining ($60,000), Setups ($40,000), Receiving ($8,000), Packing ($24,000).
Activity Rate for Receiving
- Calculate activity rate for receiving orders as: Total Receiving Costs ($8,000) / Total Orders (1,000) = $8 per order.
- Overhead assigned to 35mm camera from receiving: $8 × 200 orders = $1,600.
Consumption Ratio for Digital Cameras
- Setups ratio for Digital cameras calculated as: Setups (250) / Total Setups (350) = 0.714.
Packing Activity Rate
- Activity rate for packing based on orders: Total Packing Costs ($24,000) / Total Packing Orders (2,400) = $10.00 per order.
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Description
Explore the concepts of function-based versus activity-based calculations in cost accounting with this quiz. This chapter focuses on the allocation of overhead costs in relation to different activities for products like Fudge and Cookies. Test your understanding of cost allocation methods and their implications in real-world scenarios.
