Accounting Project
FirstLine Cases, Inc.
Chap 3 Analytical Thinking
Question 1
Table 1
The objective of the first question is to determine the amount of manufacturing overhead cost by using activity-based costing for FirstLine Cases, Inc. It is based on 6 activities cost pools, which are purchasing, material handling, production orders and setups, inspection, frame and assembly and machine-related. Expected activity is categorized into producing standard briefcases and specialty briefcases.
As you see in the table 1, (yellow filled cell) the number of orders for purchasing is the sum of Leather, fabric and synthetic material. The number of receipts for material handling is the same. According to part a of additional information, the company does 10 setups for the standard items each month and 25 setups for the specialty items. A setup for the standard items requires 1 hour, whereas a setup for the specialty items requires 2 hours. As a result, production orders and setups for each kind of briefcase (light green filled cell) are to multiply the time requirement and number of setups. According to part c of additional information, a standard briefcase requires 0.5 hours of machine time, and a specialty briefcase requires 1.2 hours of machine time. Therefore, machine-related activity is to multiply machine time per unit and unit produced each month. Then calculate the total amount of each activity for both briefcases.
Table2
Table 2 is to compute activity rate, which is dividing estimated overhead cost by the total amount of each activity (from table 1).
Table 3 & 4
Table 3 & 4 are computing the manufacturing overhead cost per unit. Firstly, compute overhead cost (blue filled cell as an example) for each activity by multiplying expected activity (from table 1) and activity rate (from table 2). Secondly, sum the total of activities (purple filled cell). Finally, dividing total overhead cost by number of unit produced each month to calculate the manufacturing overhead
Chap 3 Analytical Thinking
Question 1
Table 1
The objective of the first question is to determine the amount of manufacturing overhead cost by using activity-based costing for FirstLine Cases, Inc. It is based on 6 activities cost pools, which are purchasing, material handling, production orders and setups, inspection, frame and assembly and machine-related. Expected activity is categorized into producing standard briefcases and specialty briefcases.
As you see in the table 1, (yellow filled cell) the number of orders for purchasing is the sum of Leather, fabric and synthetic material. The number of receipts for material handling is the same. According to part a of additional information, the company does 10 setups for the standard items each month and 25 setups for the specialty items. A setup for the standard items requires 1 hour, whereas a setup for the specialty items requires 2 hours. As a result, production orders and setups for each kind of briefcase (light green filled cell) are to multiply the time requirement and number of setups. According to part c of additional information, a standard briefcase requires 0.5 hours of machine time, and a specialty briefcase requires 1.2 hours of machine time. Therefore, machine-related activity is to multiply machine time per unit and unit produced each month. Then calculate the total amount of each activity for both briefcases.
Table2
Table 2 is to compute activity rate, which is dividing estimated overhead cost by the total amount of each activity (from table 1).
Table 3 & 4
Table 3 & 4 are computing the manufacturing overhead cost per unit. Firstly, compute overhead cost (blue filled cell as an example) for each activity by multiplying expected activity (from table 1) and activity rate (from table 2). Secondly, sum the total of activities (purple filled cell). Finally, dividing total overhead cost by number of unit produced each month to calculate the manufacturing overhead