Problem 1:
Reading -Estrin, T L; Kantor, Jeffrey; Albers, David,Is ABC Suitable for Your Company?
Answer the following questions:
1. What are the ten mitigating factors? Discuss each one.
2. What are the four quadrants? Discuss each one.
3. If an organization's score puts it in Quadrant III, is ABC implementation recommended? Explain.
4. Is their method "fool proof?" Why or why not?
Problem 2:
Cost of goods manufactured & cost of goods sold
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Information for Miami Lakes Swimwear Co. month of May 2015.
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Sales
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650,000
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Purchases
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Raw materials
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90,000
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Manufacturing supplies
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2,550
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Office Supplies
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1,260
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Salaries (including fringe benefits)
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Administrative
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25,000
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Production supervisors
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35,000
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Sales
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42,000
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Depreciation
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Plant & machinery
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22,000
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Office & office equipment
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12,000
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Utilities
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Plant
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8,000
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Office
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1,450
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Inventories
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5/1/2015
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5/31/2015
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Raw materials
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12,000
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14,000
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Manufacturing supplies
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3,000
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4,500
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Office supplies
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2,200
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1,400
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Work in process
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9,000
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7,500
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Finished goods
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14,000
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11,000
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Information for Miami Lakes Swimwear Co. month of May 2015.
> Manufacturing overhead is applied to products at 80% of direct labor dollars.
> Employee base wage rate is $16.50 per hour.
> Employee fringe benefits are 35% of the base wage rate and are classified as manufacturing overhead.
> During May, production employees worked 13,500 regular hours and 550 overtime hours. There were 800 indirect labor hours.
> Employees are paid time and a half for overtime. The premium is classified as manufacturing overhead.
Required:
a. Prepare a Statement of Cost of Goods Manufactured and an Income Statement for the month of May.
b. Calculate the over/under applied overhead.
c. Adjust cost of goods sold for the over/under applied overhead. What is the adjusted net income?
d. Recalculate the cost of goods manufactured and net income using $11 per direct labor hour for APPLIED OVERHEAD.
e. Adjust cost of goods sold for the over/under applied overhead. What is the adjusted net income?
f. Comment on the answers to c & e.
Problem 3:
Activity based costing
Beeline Manufacturing produces two types of industrial ventilation machines: heavy-duty and standard. The allocation basis for overhead costs has always been direct labor hours. For 2014, Beeline compiled the following data for the two products:
Heavy-duty Standard
Sales in units 4,000 45,000
Sales price per unit $12,000.00 $9,900.00
Direct material and direct labor costs per unit $3,900.00 $3,100.00
Allocated manufacturing overhead costs per unit $1,950.00 $2,350.00
Last year, Beeline purchased an expensive robotics system to allow for more complex products in the heavy-duty line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information for 2014:
Activity Cost Driver Cost Total Heavy-dutyStandard
Setups # setups $ 1,200,000 500 410 90
Machine-related # of machine hours $ 59,800,000 500,000 250,000250,000
Packing # shipments $ 104,550,000 255,000 45,000210,000
1. Using the current cost system based on direct labor hours, what is the estimated total cost of manufacturingone unit for each type of ventilation machine?
2. Using the current cost system based on direct labor hours, what is the estimated profit per unit for each type of machine?
3. Using the activity-based costing data presented above, compute the cost driver rate for each overhead activity.
4. Using ABC, compute the revised manufacturing overhead cost per unit for the heavy-duty machine.
5. Compute the revised total cost to manufacture one unit of the heavy-duty machine.
6. Compute the revised profit on one unit of the heavy-duty machine.