Exercises (Group A) (15-20 min.) E 4-22A Req. 1 Plantwide overhead rate = Estimated total manufacturing costs Estimated cost allocation base = = $1‚150‚000 25‚000* direct labor hours = = $46 per direct labor hour *When calculating plantwide overhead rates‚ all direct labor hours incurred in the plant are used. (continued) E 4-22A Req. 2 Departmental overhead rate Machining Dept. overhead rate = = Finishing Dept. overhead rate Total department overhead
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ARBSORPTION COSTING STATEMENT DETAILS COST PER SYSTEM Systems Mist cooling Water mist OAR $1500/hrs Variable cost $ 1 450‚00 $ 1 254‚00 Fixed Overhead cost $ 4 500‚00 $ 5 400‚00 Total unit cost $ 5 950‚00 $ 6 654‚00 Traditional Absorption Costing Income Statement
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Activity-Based Costing ABC Company produces two products: Product A and Product B. Recently appointed management decided to change from a unit-based‚ traditional costing system to an activity-based costing system. The following data have been gathered‚ to assess the effect of the change: Product type Quantity Prime Costs Machine Hours Material Moves Setups Product A 60‚000 €150‚000 3‚500 6‚800 800 Product B 15‚000 € 30‚000 2‚750 1‚200 450 Expenditures (€) €180‚000 €120‚000
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What would an ABC system look like at Wilkerson? What are the revised product costs and margins under such a system? Assumptions: We are assuming that the SG&A costs have no direct effect on the costing for each product line. SG&A was kept the same‚ whether using the original costing method or ABC costing. Calculations for ABC Costing: Machine Expense: $336‚000/11‚200 = $30 per machine hour Setup Expense: $40‚000/160 = $250 per setup Engineering Expense: $100‚000/1‚250 = $80
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ABC Costing Activity-based costing (ABC) is a special costing model that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each. This model assigns more indirect costs (overhead) into direct costs compared to conventional costing models. Aims of model With ABC‚ an organization can soundly estimate the cost elements of entire products and services. That may prepare decisions on
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Activity-based costing (ABC) is a costing model that identifies activities in an organization and assigns the cost of each activity resource to all products and services according to the actual consumption by each. It also assigns more indirect costs (overhead) into direct costs. In business organization‚ the ABC methodology assigns an organization’s resource costs through activities to the products and services provided to its customers. It is generally used as a tool for understanding product and
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Activity-Based Costing in Banking Jessica Phinney ACC522: Budgeting and Cost Accounting Professor Guenther April 15‚ 2013 Activity-based costing (“ABC”) is considered one of the best and most popular tools for allocating costs by identifying individual activities as cost objects. Originally‚ activity-based costing was mainly used in manufacturing industries but‚ due to its preciseness‚ this system has recently grown popular in the service industries as well‚ including banking
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1. Wilkerson company ‘s major productions are pumps‚ valves and flow controllers. Pumps: The competitors had been reducing prices on pumps. Since pumps were a commodity product‚ the company matches the reduced prices to maintain volume. However‚ it has dropped pre-tax margin to less than 3%. Valves: Although several competitors could match its quality‚ none had tried to gain market share by cutting price‚ the gross margin had been maintain at standard 35%. Flow controllers: There was much more
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related to Wilkerson Company‚ which is a manufacturer of a few products supplied to manufacturers of water purification equipment. The three products they manufacture are: 1. Valves- high quality and highest tolerances in the industry; this product is what the company started from. 2. High-volume pumps- quickly became a major supplier of pumps; they manufacture and spend more machine hours on producing this product 3. Flow controllers- most unique and highest selling product. Wilkerson Company would
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5-47 ABC and TOC Discuss the similarities and differences between activity-based costing and the theory of constraints‚ as well as situations in which one approach might be preferable to the other. 5-48 Cycle time efficiency and JIT Walker Brothers Company is considering installing a JIT manufacturing system in the hope that it will improve its overall processing cycle efficiency. Data from the traditional system and estimates for the JIT system are presented here for their Nosun Product:
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