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Overhead costs have been divided into three cost pools that use the following activity drivers.
Product
# of Setups
Machine Hours
Packing Orders
X
24
1,300
75
Z
24
3,900
225
Cost per Pool
 $60,000 
 $150,000 
 $30,000 
 
 
 
 
 
 
 
 
a. What is the allocation rate for Product Z per setup using activity-based costing?
b. What is the allocation rate for Product Z per machine hours using activity-based costing?
c. What is the allocation rate for Product Z per packing order using activity-based costing?

      [removed]

 

4. (TCO 8) Household Manufacturing Inc. sells its product for $45 each.

Sales volume averages 2,000 units per year.
 
 
 
 
Recently, its main competitor reduced the price of its product to $30.
 
 
Maximum expects sales to drop dramatically unless it matches the competitor's price.
In addition, the current profit per unit must be maintained.
 
 
Information about the product (for production of 2,000) is as follows:
 
 
 
 
Standard Quantity
Actual Quantity
Actual Cost
Materials (pounds)
 
 3,200 
 3,500 
 $35,000 
Labor (hours)
 
 900 
 1,000 
 $30,000 
Setups (hours)
 
0
125
 $3,000 
Material handling (moves)
 
0
200
 $4,000 
Warranties (number repaired)
 
0
450
 $11,000 
 
 
 
 
 
 
 
 
 
 
Required:
 
 
 
 
 
 
 
 
a. Calculate the target cost for maintaining current market share and profitability.
b. Calculate the non-value-added cost per unit.
 
 
 
 
c. If non-value-added costs can be reduced to zero, can the target cost be achieved?


  (Points : 40)

    • 12 years ago
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