Acc349 Cost AccountingWeek 3 AssignmentsE4-10Mallory Luongo, Inc, manufactures five models of kitchen appliances at itsMesaplant. The company is installing activity-based costing and has identified the following activities performed at itsMesaplant. Having analyzed itsMesaplant operations for purposes of installing activity-based costing, Mallory Luongo, Inc. identified its activity cost centers. It now needs to identify relevant activity cost drivers in order to assign overhead costs to its products. Using the activities listed below, identify for each activity one or more cost drivers that might be used to assign overhead to Mallory Luongo’s five products. InstructionsUsing the activities listed above, identify for each activity one or more cost drivers that might be used to assign overhead to Mallory Luongo’s five products.E4-11 Sorce Instrument, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 300 pressure gauges were produced, and overhead costs of $89,500 were estimated. An analysis of estimated overhead costs reveals the following activities. Activities Cost Drivers Total Cost 1. Materials Handling Number of requisition 35,000 2. Machine setups Number of setups 27,500 3. Quality inspections Number of inspections 27,000 $89,500 The cost driver volume for each product was as follows: Cost Drivers Instruments Gauges Total Number of requisition 400 600 1,000Number of setups 200 300 500 Number of inspections 200 400 600 Instructions: (a) Determine the overhead rate for each activity. (b) Assign the manufacturing overhead costs for April to the two products using activity based costing. P4-3A Skaros Stairs Co. of Moore designs and builds factory-made premium wooden stairways for homes. The manufactured stairway components (spindles, risers, hangers, hand rails) permit installation of stairways of varying lengths and widths. All are of white oak wood. Budgeted manufacturing overhead costs for the year 2011 are as follows. Overhead Cost Pools Amount Purchasing 57,000 Handling materials 82,000 Production (cutting,milling, finishing) 210,000 Setting up machines 85,000 Inspecting 90,000 Inventory control (raw materials and finished goods) 126,000 Utilities 180,000 Total budget overhead costs 830,000 Activity Cost Pools Cost Drivers Expected Use of Cost Drivers Purchasing Number of orders 600 Handling materials Number of moves 8,000 Production (cutting, milling, finishing) Direct labor hours 100,000 Setting up machines Number of setups 1,250 Inspecting Number of inspections 6,000 Inventory control (raw materials and finished goods) Number of components 168,000 Utilities Square feet occupied 90,000 David Hannon, sales manager, has received an order for 280 stairs from Community Builders, Inc., a large housing development contractor. At David’s request, Neal prepares cost estimates for producing components for 280 stairs so David can submit a contract price per stair to Community Builders. He accumulates the following data for the production of 280 stairways. Direct materials 103,600 Direct labor 112,000 Machine hours 14,500 Direct labor hours 5,000 Number of purchase orders 60 Number of material moves 800 Number of machine setups 100 Number of inspections 450 Number of components 16,000 Number of square feet occupied 8,000 Requirement: a. Compute the predetermined overhead rate using traditional costing with machine hours as the basis. b. What is the manufacturing cost per stairway under traditional costing?c. What is the manufacturing cost per stairway under the proposed activity-based costing?P4-4A Polzin Corporation produces two grades of wine from grapes that it buys from California growers. It produces and sells roughly 3,000,000 liters per year of a low-cost, high-volume product called CoolDay. It sells this in 600,000 5-liter jugs. Polzin also produces and sells roughly 300,000 liters per year of a low-volume, high-cost product called LiteMist. LiteMist is sold in 1-liter bottles. CoolDay LiteMist Direct materials per liter 0.40 1.20 Direct labor cost per liter 0.25 0.50 Direct labor hours per liter 0.05 0.09 Total direct labor hours 150,000 27,000 Expected Use of Cost Drivers per Product Activity Cost Pool Cost Driver Estimated Overhead Expected Use of Cost Drivers CoolDay LiteMistGrape processing Cart of grapes 145,860 6,600 6,000 600Aging Total months 396,000 6,600,000 3,000,000 3,600,000Bottling and corking Number of bottles 270,000 900,000 600,000 300,000Labeling and boxing Number of bottles 189,000 900,000 600,000 300,000Maintain and inspect equipment Number of inspections 240,800 800 350 450Total estimated overhead $1,241,660 Requirement: 1. Under traditional product costing using direct labor hours, compute the total manufacturing cost per liter of both products. 2. Under ABC, prepare a schedule showing the computation of the activity-based overhead rates (per cost driver). 3. Prepare a schedule assigning each activity’s overhead cost pool to each product, based on the use of cost drivers. What is the overhead cost per liter? 4. Compute the total manufacturing cost per liter for both products under ABC.
