Tutorial Chapter 8
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Tutorial Chapter 8 EXERCISE 8-8 Activity Measure Ming Corporation Activity a. direct Labor worker assemble a product b. Product are designed by engineer c. Equipment is setup d. Machines are used to shape and cut materials e. Monthly bills are sent out to regular customers f. materials are moved from the receiving dock to production lines g. All completed units are inspected to defects
Activity Classification Unit level
Example of activity Measure
Product level Batch level Unit level
Number of product designed Number of setup Number of machines hours
Customer level
Number of bills
Batch level
Number of batch
Unit level
Number of inspected unit
EXERCISE 8-9 Computing ABC product Costs i.
Machine setup = $ 72,000 400 = $180 per Setup
ii.
Special processing = $ 200,000 5,000 = $ 40 per Machine hours
iii.
General factory = $ 816,000 24,000 = $ 34 per DL hours
Number of DL hours
EXERCISE 8-10 First Stage Allocations
Teller wages Assistant branch manager salary Branch manager salary Total
Processing Opening deposit & accounts withdrawal s $ 8,000 $ 104,000
Processing other customer transaction $ 32,000
$ 16,000
$ 160,000
Other activity
Total
$11,250
$3,750
$ 22,500
$37,500
$ 75,000
$ 4,000 $ 23,250
-------$ 107,750
$ 8,000 $ 62,500
$ 68,000 $ 121,500
$ 80,000 $ 315,00
EXERCISE 8-11 Computing and Interpreting Activity Rates Activity Cost Pools Opening accounts Processing deposits & Withdrawals Processing other customer transactions
Total Cost $ 23,250
Total Activity 500
Activity Rate $ 46.50
$ 107,750
100,000
$ 1,08
$ 62,500
5,000
$ 12.50
EXERCISE 8-12 Second – Stage allocation to an Order
Overhead Cost Assigned To The Other Activity Cost Pools Order size Customer Orders Product Testing Selling Total
Activity Rate R 16.85 R 320.00 R 89.00 R 1090.00
Activity 200 order -4 hours 2 sales
Note: The currency in South Africa is the Rand, denoted here by R
ABC Cost R 3,370 0 R 356 R 2,180 R 5,906
EXERCISE 8-18 Comprehensive Activity – Based Costing Exercise 1.
Distribution Of Resource Consumption Across Activity Cost Pools Wages & salaries Other Overhead cost Total
Volume Related $ 120,000
Order Related $ 90,000
Customer support $ 60,000
Other
Total
$ 30,000
$ 300,000
$ 30,000 $ 150,000
$ 10,000 $ 100,000
$ 20,000 $ 80,000
$ 40,000 $ 70,000
$ 100,000 $ 400,000
2. Activity Cost Pools Volume Related Order Related Customer Support Other
Total Cost $ 150,000 $ 100,000 $ 80,000 $ 70,000
Total Activity 20,000 DLHs 400 Order 200 Customer Not Applicable
Activity Rate $ 7.50 / DLHs $ 250 / Order $ 400 /Customer Not Appliczble
3.
Overhead Cost For The Other Activity Cost Pools Volume Related Order Related Customer Support Other Total
Activity Rate $ 7.50 / DLHs $ 250 / Order $ 400 / Customer --
Activity 2 DLHs 10 Unit ---
ABC Cost $ 15.00 $ 2500 0 0 $ 2515.00
Activity Classification Unit level
Example of activity Measure
Product level Batch level Unit level
Number of product designed Number of setup Number of machines hours
Customer level
Number of bills
Batch level
Number of batch
Unit level
Number of inspected unit
EXERCISE 8-9 Computing ABC product Costs i.
Machine setup = $ 72,000 400 = $180 per Setup
ii.
Special processing = $ 200,000 5,000 = $ 40 per Machine hours
iii.
General factory = $ 816,000 24,000 = $ 34 per DL hours
Number of DL hours
EXERCISE 8-10 First Stage Allocations
Teller wages Assistant branch manager salary Branch manager salary Total
Processing Opening deposit & accounts withdrawal s $ 8,000 $ 104,000
Processing other customer transaction $ 32,000
$ 16,000
$ 160,000
Other activity
Total
$11,250
$3,750
$ 22,500
$37,500
$ 75,000
$ 4,000 $ 23,250
-------$ 107,750
$ 8,000 $ 62,500
$ 68,000 $ 121,500
$ 80,000 $ 315,00
EXERCISE 8-11 Computing and Interpreting Activity Rates Activity Cost Pools Opening accounts Processing deposits & Withdrawals Processing other customer transactions
Total Cost $ 23,250
Total Activity 500
Activity Rate $ 46.50
$ 107,750
100,000
$ 1,08
$ 62,500
5,000
$ 12.50
EXERCISE 8-12 Second – Stage allocation to an Order
Overhead Cost Assigned To The Other Activity Cost Pools Order size Customer Orders Product Testing Selling Total
Activity Rate R 16.85 R 320.00 R 89.00 R 1090.00
Activity 200 order -4 hours 2 sales
Note: The currency in South Africa is the Rand, denoted here by R
ABC Cost R 3,370 0 R 356 R 2,180 R 5,906
EXERCISE 8-18 Comprehensive Activity – Based Costing Exercise 1.
Distribution Of Resource Consumption Across Activity Cost Pools Wages & salaries Other Overhead cost Total
Volume Related $ 120,000
Order Related $ 90,000
Customer support $ 60,000
Other
Total
$ 30,000
$ 300,000
$ 30,000 $ 150,000
$ 10,000 $ 100,000
$ 20,000 $ 80,000
$ 40,000 $ 70,000
$ 100,000 $ 400,000
2. Activity Cost Pools Volume Related Order Related Customer Support Other
Total Cost $ 150,000 $ 100,000 $ 80,000 $ 70,000
Total Activity 20,000 DLHs 400 Order 200 Customer Not Applicable
Activity Rate $ 7.50 / DLHs $ 250 / Order $ 400 /Customer Not Appliczble
3.
Overhead Cost For The Other Activity Cost Pools Volume Related Order Related Customer Support Other Total
Activity Rate $ 7.50 / DLHs $ 250 / Order $ 400 / Customer --
Activity 2 DLHs 10 Unit ---
ABC Cost $ 15.00 $ 2500 0 0 $ 2515.00
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