Question & Answer: Managerial Accounting (15th Edition)…..

Question on Activity Based Costing:

Managerial Accounting (15th Edition)

Chapter 7, Problem 16P

Here’s the web-link to the question:

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

Still stressed from student homework?

Get quality assistance from academic writers!

Order now