MANAGERIAL ACCOUNTING HANDOUT PROBLEM 6 Score Name Section Problem (10 points) C

Question

MANAGERIAL ACCOUNTING HANDOUT PROBLEM 6 Score Name Section Problem (10 points) Cage, Inc. manufactures television stands and uses an activity based costing system. Cage's estimates for its activities and related data for the current year are attached. Two styles of television stands were produced in April, the standard and unfinished. Data relating to production of these products for the month of April is attached. REQUIRED: Compute the predetermined manufacturing overhead rates for each of the activities used by the company in their manufacturing process using activity based costing Compute the amount of manufacturing overhead costs that should be applied to cach product for the month of April using activity based costing, all amounts to the nearest whole dollar. (2) Round

Explanation / Answer

(1) Calculation of Manufacturing Overhead Rates:

The formula applied = Budgeted Cost of Activity/Total Budgeted Cost Driver

Material Handling = 100,000/1,000,000 = $0.10 per part

Cutting = 1,000,000/1,000,000 = $ 1 per part

Assembling = 3,000,000/150,000 = $20 per hour

Finishing = 60,000/20,000 = $3 per finished unit

2. Calculation of Manufacturing Overhead Cost applied to each product

Standard Unfinished A No. of Parts 30,000 36,000 B No. of Direct Labour Hours 3,000 2,800 C No. of finished units 2,000 3,000 D Material Handling (@0.10 per part) [(A*).0.10)] 3,000 3,600 E Cutting (@$1 per part) [1*(A)] 30,000 36,000 F Assembling (@$20 per labour hr) [(B)*20] 60,000 56,000 G Finishing (@$3 per unit) [(C)*3] 6,000 9,000 H Total Overhead Allocated [D+E+F+G] 99,000 104,600

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