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7 months ago

(WIP) ACC 350 Exam 1 Study Material

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Requirements: 1.

Requirements: 1. Determine the plant-wide overhead rate using the current costing system. 2. Determine the gross margin (per unit) of the regular and deluxe models using the current costing system. Deluxe Regular 3. For each activity, identify an activity driver and calculate the activity driver rates. 4. Determine the gross margin (per unit) of the regular and deluxe models using the ABC information. Deluxe Regular 5. Is the deluxe model as profitable as the company thinks it is? Why or why not? 6. What can Manhattan Company do to improve its profitability? Should the company drop the Deluxe model? Why or why not?

Problem #3 – Activity Based Costing Problem Anderson Company uses a conventional cost system with overhead allocated to products on the basis of direct labor hours. The company manufactures two products, for which the following estimated information for next year is available. Standard Unique Selling Price $125 $195 Number of Units Produced 15,000 5,000 Prime Cost per Unit $85 $125 DLH per unit 2 1 # of units produced each MH 7.5 2.5 Units per batch 30 10 Hours to setup a batch 4 6 Number of moves per batch 2 3 Engineering Support Hours 1,000 2,000 Total overhead for the current year was estimated to be $402,500 from the following activities: Activity Cost Material Handling $ 30,000 Machine Set-ups $100,000 Engineering Support $150,000 Power for Machines $ 80,000 Providing Space $ 42,500 Total $402,500 If the company adopts an ABC system, they will allocate facility-level costs equally to each product line. Requirements: 1. Estimate the cost per unit of the two products using the current cost system.