Stage 2 ABC for Manufacturing: Reassigning Costs to Cost Objectives
National Technology,LTD. has developed the following activity cost information for its manufacturing activities:
Activity Activity cost
Machine setup $65.00 per batch
Movement 15 per batch move
0.1 per pound
Drilling 4 per hole
Welding 4 per inch
Shaping 25 per hour
Assembly 17 per hour
Inspection 2 per unit
Filling an order for a batch of 50 fireplace inserts (each insert weighing 150 pounds) required the following:
Three batch moves
Two sets of inspections
Drilling five holes in each unit
Completing 80 inches of welds on each unit
Thirty minutes of shaping for each unit
One hour of assembly per unit
Determine the activity cost of converting the raw materials into 50 fireplace inserts.
Indirect Cost Allocation: Direct Method
Sprint Manufacturing Company has two production departments, Melting and Molding. Direct general plant management and plant security costs benefit both production departments. Sprint allocates general plant management costs on the basis of the number of production employees and plant security costs on the basis of space occupied by the production departments. In November, the following overhead costs were recorded:
Melting Department direct overhead $175,000
Molding Department direct overhead 300,000
General plant management 90,000
Plant security 35,000
Melting Molding
Number of employees 25 45
Space occupied (square feet) 10,000 40,000
Machine hours 10,000 2,000
Direct labor hours 4,000 20,000
(a) Prepare a schedule allocating general plant management costs and plant security costs to the Melting and Molding Departments. (Round your answer to the nearest whole number. Do not round until your final answer.)
Department Total Melting Molding
General Plant Management $ $ $
Plant security $ $ $
(b) Determine the total departmental overhead costs for the Melting and Molding Departments.
Melting $ $
Molding $ $
(c) Assuming the Melting Department uses machine hours and the Molding Department uses direct labor hours to apply overhead to
production, calculate the overhead rate for each production department. (Round your answers to two decimal places.)
Melting $ $
Molding $ $
Interdepartment Services: Step Method
Tucson Manufacturing Company has five operating departments, two of which are producing departments (P1 and P2) and three of which are service departments (S1, S2, and S3). All costs of the service departments are allocated to the producing departments. The following table shows the distribution of services from the service departments.
Services provided
from Services Provided to
S1 S2 S3 P1 P2
S1 -- 5% 25% 50% 20%
S2 10% -- 5 45 40
S3 15 5 -- 20 60
The direct operating costs of the service departments are as follows:
S1 $49,000
S2 93,500
S3 18,000
Refer to the data above. Using the step method, prepare a schedule for Tucson Manufacturing Company allocating the service department costs to the producing departments. (Round calculations to the nearest dollar. Do not round until your final answers.)
Service Departments
Producing Departments
S1 S2 S3 P1 P2
Total costs 0 0 0 $ $