PA1.

LO 6.1Colonels uses a traditional cost system and estimates next year’s overhead will be $480,000, with the estimated cost driver of 240,000 direct labor hours. It manufactures three products and estimates these costs: If the labor rate is$25 per hour, what is the per-unit cost of each product?

PA2.

LO 6.1Five Card Draw manufactures and sells 24,000 units of Diamonds, which retails for $180, and 27,000 units of Clubs, which retails for$190. The direct materials cost is $25 per unit of Diamonds and$30 per unit of Clubs. The labor rate is $25 per hour, and Five Card Draw estimated 180,000 direct labor hours. It takes 3 direct labor hours to manufacture Diamonds and 4 hours for Clubs. The total estimated overhead is$720,000. Five Card Draw uses the traditional allocation method based on direct labor hours.

1. What is the gross profit per unit for Diamonds and Clubs?
2. What is the total gross profit for the year?
PA3.

LO 6.2A local picnic table manufacturer has budgeted these overhead costs:

They are considering adapting ABC costing and have estimated the cost drivers for each pool as shown:

Recent success has yielded an order for 1,000 tables. Assume direct labor costs per hour of $20. Determine how much the job would cost given the following activities: PA4. LO 6.2Explain how each activity in this list can be associated with the corresponding unit or batch level provided. 1. Assembling products: unit level 2. Issuing raw materials: batch level 3. Machine setup: batch level 4. Inspection: unit level 5. Loading the labeling machine: batch level 6. Equipment maintenance: batch level 7. Printing a banner: unit level 8. Moving material: batch level 9. Ordering a part: batch level PA5. LO 6.3Medical Tape makes two products: Generic and Label. It estimates it will produce 423,694 units of Generic and 652,200 of Label, and the overhead for each of its cost pools is as follows: It has also estimated the activities for each cost driver as follows: How much is the overhead allocated to each unit of Generic and Label? PA6. LO 6.3Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is$25 per unit and $40 is used in direct labor, while the direct material for the double is$40 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 9,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows: How much does each unit cost to manufacture? PA7. LO 6.3Please use the information from this problem for these calculations. After grouping cost pools and estimating overhead and activities, Box Springs determined these rates: It estimates there will be five orders in the next year, and those jobs will involve: What is the total cost of the jobs? PA8. LO 6.4A company has traditionally allocated its overhead based on machine hours but had collected this information to change to activity-based costing: 1. How much overhead would be allocated to each unit under the traditional allocation method? 2. How much overhead would be allocated to each unit under activity-based costing? PA9. LO 6.4Carlton’s Kitchens makes two types of pasta makers: Strands and Shapes. The company expects to manufacture 70,000 units of Strands, which has a per-unit direct material cost of$10 and a per-unit direct labor cost of $60. It also expects to manufacture 30,000 units of Shapes, which has a per-unit material cost of$15 and a per-unit direct labor cost of $40. It is estimated that Strands will use 140,000 machine hours and Shapes will require 60,000 machine hours. Historically, the company has used the traditional allocation method and applied overhead at a rate of$21 per machine hour. It was determined that there were three cost pools, and the overhead for each cost pool is shown:

The cost driver for each cost pool and its expected activity is shown:

1. What is the per-unit cost for each product under the traditional allocation method?
2. What is the per-unit cost for each product under ABC costing?
3. Compared to ABC costing, was each product’s overhead under- or overapplied?
4. How much was overhead under- or overapplied for each product?
PA10.

LO 6.4Carlton’s Kitchen’s three cost pools and overhead estimates are as follows:

2. The activity-based costing method

(Hint: the traditional method uses machine hours as the allocation base.)

PA11.

LO 6.4Lampierre makes brass and gold frames. The company computed this information to decide whether to switch from the traditional allocation method to ABC:

The estimated overhead for the material cost pool is estimated as $12,500, and the estimate for the machine setup pool is$35,000. Calculate the allocation rate per unit of brass and per unit of gold using:

2. The activity-based costing method
PA12.

LO 6.4Portable Seats makes two chairs: folding and wooden. This information was obtained to review the decision to consider ABC:

Compute the overhead assigned to each product under:

2. The activity-based costing method
PA13.

LO 6.5Grainger Company produces only one product and sells that product for $100 per unit. Cost information for the product is:  Direct Material$15 per Unit Direct Labor $25 per Unit Variable Overhead$5 per Unit Fixed Overhead $34,000 Selling expenses are$4 per unit and are all variable. Administrative expenses of \$20,000 are all fixed. Grainger produced 5,000 units; sold 4,000; and had no beginning inventory.

1. Compute net income under
1. absorption costing
2. variable costing
2. Reconcile the difference between the income under absorption and variable costing.
PA14.

LO 6.5Summarized data for Walrus Co. for its first year of operations are:

1. Prepare an income statement under absorption costing
2. Prepare an income statement under variable costing
PA15.

LO 6.5Happy Trails has this information for its manufacturing:

Its income statement under absorption costing is:

Prepare an income statement with variable costing and a reconciliation statement between both methods.

PA16.

LO 6.5Appliance Apps has the following costs associated with its production and sale of devices that allow appliances to receive commands from cell phones.

Prepare an income statement under both the absorption and variable costing methods along with a reconciliation between the two statements.

PA17.

LO 6.5This information was collected for the first year of manufacturing for Appliance Apps:

Prepare an income statement under variable costing, and prepare a reconciliation to the income under the absorption method.