Product-Costing Accuracy, Consumption Ratios, Activity Rates, Activity Costing T

Question

Product-Costing Accuracy, Consumption Ratios, Activity Rates, Activity Costing Tristar Manufacturing produces two types of battery-operated toy soldiers: infantry and special forces. The soldiers are produced using one continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have been used to assign costs to cach activity. The overhead activities, their costs, and the other related data are as follows: Machining Senps (number Receiving (numbe Packing (number Product of orders) of orders) (machine hours) of setups) 300 100 24,000 20,000 20,000 80,000 Infantry 900 100 S18,000 1.600 800 S30,000 Special forces Costs Required 1. Calculate the total overhead assigned to each product by using only machine hours to calculate a plantwide rate. Infantry Special forces 2. Calculate consumption ratios for each activity, Round your answers to two decimal places. Product Infantry Special forces 3. Calculate a rate for each activity by using the associated driver. If required, round your answers to two decimal places. Machining Setups Receiving Packing 4. Assign the overhead costs to each product by using the activity rates computed in Requirement 3. Machine Hours Setups Receiving Orders Packing Orders per machine hour per setup per receiving order per packing order Infantry Special Forces Setups Receiving Packing Total 5. Comment on the difference between the assignment in Requirement 1 and the activity-based assignment.

Explanation / Answer

1) overhead rate (total estimated cost)/total machine hours (80,000+24,000+18000+30000)/40,000 3.8 overhead assigned Infantry (20,000*3.8) 76000 special forces (20,000*3.8) 76000 2) ratios Machine Setups Receiving packing hours orders orders infantry 0.5 0.75 0.9 0.67 Special forces 0.5 0.25 0.1 0.33 ratio = activity of individual product/total activity $ 3) Machining (80,000/40,000) 2 per machine hr Setup (24,000/400) 60 per setup Receiveing (18000/1,000) 18 per receiving order packing (30,000/2,400) 12.5 per packing order 4) overhead assinged infantry Special Machining 40,000 40,000 Setup 18000 6000 Receiveing 16200 1800 packing 20000 10000 total 94,200 57,800 5) Tradtional system is based on only machine hours whereas activity based is based on the actual activity

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