The ABC Assembling Department has the following production and manufacturing cos
ID: 2503066 • Letter: T
Question
The ABC Assembling Department has the following production and manufacturing cost data for January. Materials are entered at the beginning of the process.
Production: Beginning inventory
1,000
units that are
100%
complete as to materials and
50%
complete as to conversion costs; units started during the period are
25,400
ending inventory of
3,000
units
20%
complete as to conversion costs.
Manufacturing costs: Beginning inventory costs, comprised of
$30,000
of materials and
$31,980
of conversion costs; materials costs added in Assembling during the month,
$25,500
labor
and overhead applied in Assembling during the month,
$55,850
and
$155,140
respectively.
Instructions:
(a) Compute the equivalent units of production for materials and conversion costs for the month.
Step 1:
Physical
Units
Work in process, Beg. Invent.
Units started during the period
Total units
Units transferred out
23,400
WIP Ending inventory
3,000
Total units
26,400
Step 2
Equivalent Units
Materials 100%
Conversion 20%
Costs
Units transferred out
23,400
23,400
Work in process
WIP ending Inventory * % complete
WIP ending Inventory * % complete
Total Units
(b) Compute the units costs for materials and conversion costs for the month.
Step 3
Unit Costs for Materials
Materials
Work in process, Beg. Invent.
Direct Materials
Costs added to production during the month
Total materials cost
Material cost per unit (Total material cost / units)
Unit Conversion Costs
Work in process, Beg. Invent.
Conversion Costs
Total Costs added to production during the month
Conversion Costs
Total conversion costs
Conversion cost per unit (Total conversion cost / units)
Total Material costs per unit and Conversion cost per unit _______________
(c) Determine the costs to be assigned to the units transferred out and in process.
Step 4 Costs accounted for
Transferred out # units * total unit cost
Work in process, Ending Inventory
Materials Costs
Conversion Costs
Total costs
Assign overhead using traditional costing and ABC
Laura Inc. manufactures two products: Hair Ties and Bracelet Ties. To determine the amount of
overhead to assign to each product line, the controller, Corey, has developed the following information.
Hair Ties
Bracelet Ties
Estimated ties produced
30,000
15,000
Direct labor hours per tie
2
3
Total estimated overhead costs for the two product lines are
$550,000
Instructions:
(a) Compute the overhead cost assigned to the hair ties and bracelet ties, assuming that direct labor hours
is used to allocate overhead costs.
DL Hours for Hair Ties
DL Hours for Bracelets Ties
Total DL hours
Total estimated overhead
Dollars per direct labor hour
Dollars per direct labor hour
Total direct labor hours
Overhead assigned
Hair Ties
Bracelet Ties
Total overhead
(b) Corey is not satisfied with the traditional method of allocating overhead because she
believes that most of the overhead costs relate to the hair ties product line because of its complexity.
She therefore develops the following three activity cost pools and related cost drivers to better understand these costs.
Activity Cost Pool
Costs for Pools
Estimated Overhead
ABC Overhead Rate
Setting up machines
$110,000.00
500 setups
Assembling
$310,000.00
40,000 labor hours
Inspection
$130,000.00
700 inspections
Compute the activity-based overhead rates for these three cost pools put your answer in the 4th. Column above.
(c) Compute the cost that is assigned to the hair ties and bracelet ties product lines using an activity-based costing system,
given the following information.
Setting up machines
$110,000.00
500 setups
Assembling
$310,000.00
40,000 labor hours
Inspection
$130,000.00
700 inspections
Hair Ties
Activity Cost Pool
Expected Use of Cost Drivers per Product
Activity Based Overhead
Rates and the total cost assigned
Cost Assigned
Setting up machines
100
Assembling
25,000
Inspection
200
Total cost
Bracelet Ties
Activity Cost Pool
Expected Use of Cost Drivers per Product
Activity Based Overhead
Rates and the total cost assigned
Cost Assigned
Setting up machines
400
Assembling
15,000
Inspection
500
Total cost assigned
(d) What do you believe Corey should do? (Enter your text answer in the block below.)
The ABC Assembling Department has the following production and manufacturing cost data for January. Materials are entered at the beginning of the process.
Production: Beginning inventory
1,000
units that are
100%
complete as to materials and
50%
complete as to conversion costs; units started during the period are
25,400
ending inventory of
3,000
units
20%
complete as to conversion costs.
Manufacturing costs: Beginning inventory costs, comprised of
$30,000
of materials and
$31,980
of conversion costs; materials costs added in Assembling during the month,
$25,500
labor
and overhead applied in Assembling during the month,
$55,850
and
$155,140
respectively.
Instructions:
(a) Compute the equivalent units of production for materials and conversion costs for the month.
Step 1:
Physical
Units
Work in process, Beg. Invent.
Units started during the period
Total units
Units transferred out
23,400
WIP Ending inventory
3,000
Total units
26,400
Step 2
Equivalent Units
Materials 100%
Conversion 20%
Costs
Units transferred out
23,400
23,400
Work in process
WIP ending Inventory * % complete
WIP ending Inventory * % complete
Total Units
(b) Compute the units costs for materials and conversion costs for the month.
Step 3
Unit Costs for Materials
Materials
Work in process, Beg. Invent.
Direct Materials
Costs added to production during the month
Total materials cost
Material cost per unit (Total material cost / units)
Unit Conversion Costs
Work in process, Beg. Invent.
Conversion Costs
Total Costs added to production during the month
Conversion Costs
Total conversion costs
Conversion cost per unit (Total conversion cost / units)
Total Material costs per unit and Conversion cost per unit _______________
(c) Determine the costs to be assigned to the units transferred out and in process.
Step 4 Costs accounted for
Transferred out # units * total unit cost
Work in process, Ending Inventory
Materials Costs
Conversion Costs
Total costs
Explanation / Answer
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