Managerial Accounting Notes

Accounting chapter 7 managerial accounting Exercises Lambert Fabrication, Inc. , uses activity-based costing data for internal decisions. The company has the following four activity cost pools: Activity Cost PoolAnnual Activity Producing units5,000 machine-hours Processing orders1,000 orders Customer support200 customers OtherNot applicable The â€Å"Other† activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The company traces the costs of direct materials and direct labor to jobs (i. . , orders). Overhead costs—both manufacturing and non-manufacturing—are allocated to jobs using the activity-based costing system. These overhead costs are listed below: Indirect factory wages$100,000 Other manufacturing overheadS200,000 Selling and administrative expense$400,000 To develop the company's activity-based costing system, employees were asked how they distributed their time and resources across the four activity cost pools. The results of those interviews appear below: Results of Interviews of EmployeesDistribution of Resource Consumption Across Activities Producing Processing Customer UnitsOrdersSupportOtherTotals Indirect factory wages40%30%10%20%100% Other manufacturing overhead30%10%0%60%100% Selling and administrative expense0%25%40%35%100% a. Using the results of the interviews, carry out the first-stage allocation of costs to the activity cost pools. Producing Processing Customer UnitsOrdersSupportOtherTotals Indirect factory wages $ S S $ SOther manufacturing overhead Selling and administrative expense.. Total overhead cost $$ $___ ___ $ $__ ____ Chapter 7 b. Using the results of the first-stage allocation, compute the activity rates for each of the activity cost pools. (Activity rates are not computed for the â€Å"Other† activity cost pool because these costs will not be allocated to products or customers. ) Computation of Activity RatesActivity Cost Pools Total CostTotal ActivityActivity Rate Producing units $ machine-hours $ per machine-hour Processing orders $ orders $ per order Customer support $ customers $per customer c. Data concerning one of the company's products are listed below: Product W562 Selling price$100 Annual sales (units)1,000 Direct materials per unit$24 Direct labor per unit$6 Machine-hours per unit1. 5 Orders processed80 Using the activity rates you derived in part (b) above and the above data, compute the total amount of over ¬head cost that would be allocated to product W562.Overhead Cost of Product W562 Activity Cost PoolsActivity RateActivityABC Cost Producing units$per machine-hourmachine-hours$ Processing orders$per orderorders Customer support$per customerNot applicable Total $__________ d. Using the data developed above for product W562, complete the following report. Product Margin—Product W562 Sales$ Costs: Direct materials$ Direct labor Producing units Processing orders ________ Product margin $_______________