ABC Costing

Problem 4.30

1. Plantwide
Overhead Cost 384 000 2. Departmental Rate:
1 152 000 Department 1
1 536 000
Direct Labor 640 000+ 128 000 /768 000
2 Department 2

Overhead Assignment
Product 1 576000*2 1152000
Product 2 185600*2 371200 Overhead Assignment
Product 1
Product 2
Applied Overhead for the Year
436800
1168320

: If overhead variance is mat

Problem 4.31
Plantwide Rate: 4500000
/150000
30
Unit Cost
+Prime Cost Total /Units Completed
Standard 75000*30 2250000 4500000 $6,750,000 30000
Deluxe 75000*30 2250000 5250000 $7,500,000 15000

Activity Based Rate:

OH Cost /Act. Drivers Rate

 Maintenance 600000 /30000 20
Engineering Support 900000 /45000 20
Materials Handling 1200000 /60000 20
Setups 750000 /600 1250
Purchasing 450000 /2250 200
Receiving 300000 /7500 40
Paying 300000 /7500 40

Standard xRate Total Deluxe xRate

6000 20 120000 24000 20
13500 20 270000 31500 20
15000 20 300000 45000 20
60 1250 75000 540 1250
750 200 150000 1500 200
3000 40 120000 4500 40
3750 40 150000 3750 40
$1,185,000
OH Unit Cost
Standard $1,185,000 /30000 $39.50
Deluxe $3,315,000 /15000 $221

Comparison of Overhead Unit Cost

Plantwide Activity Based
Standard $75 $39.50
Deluxe $150 $221
Activity Based Costing, for me, is more accurate. Because it enables more to trace different drivers tha

Process Costing

Problem 6.31
Swasey Fabrication, Inc.
Physical Flow Schedule

Units to account for: Units accounted for:

Units, beginning work in process 40,500 Units completed and transferred out
Units started (transferred in) 94,500 Units, ending work in process
Total units to account for 135,000 Total units accounted for

Equivalent Units
Unit direct materials cost
 Direct Materials 135,000 Unit conversion costs
Conversion Costs 124,875 Total unit cost

Work in Process-Welding 9,477,000

Work in Process-Cutting 9,477,000

Cost of goods transferred out 9,477,000

Ending Work-in-Process 546750

Problem 6.32
FIFO Method

Swasey Fabrication, Inc.

Physical Flow Schedule

Units to account for: Units accounted for:

Units, beginning work in process 40,500 Units completed and transfer
Units started (transferred in) 94,500 Units, ending work in proces
Total units to account for 135,000 Total units accounted for

Equivalent Units

Direct Materials 94,500 Total unit cost

Conversion Costs 116,775

Cost of goods transferred out $9,487,595

Ending Work-in-Process $536,115

Problem 6.36

Molding Department, Physical flow schedule:

Units to account for: Units accounted for:

Units, beginning work in process 10,000 Units completed and transfer
Units started in February 25,000
Total units to account for 35,000
Units, ending work in proces
Total units accounted for
 Total Equivalent Units
Direct Materials 35,000 Total unit cost
Conversion Costs 34,000

Cost of goods transferred out $170,571

Ending Work-in-Process $24,979

Cost Reconciliation

Costs to account for: Costs accounted for:

Beginning work in process $35,800 Transferred out
Costs incurred $159,750 Ending work in process
Total costs to account for 195,550 Total costs accounted for

a. Work in Process-Molding 56,250

Materials Inventory 56,250

b. Work in Process-Molding 103,500

Conversion Costs-Control 103,500
c.
Work in Process-Assembly 170,571
Work in Process-Molding 170,571

Assembly Department, Physical flow schedule:

Units accounted for: Units accounted for:

Units, beginning work in process 8,000 Units completed and transfer
Units started in February (transferred in) 30,000
Total units to account for 38,000
Units, ending work in proces
Total units accounted for

Total Equivalent Units

Direct Materials 35,000 Total unit cost

Conversion Costs 36,500
Transferred In 38,000
 Cost of goods transferred out $385,287
Ending Work-in-Process $23,335

Cost Reconciliation

Costs to account for: Costs accounted for:

Beginning work in process $62,000 Transferred out
Costs incurred $346,621 Ending work in process
Total costs to account for $408,621 Total costs accounted for

*Differ by $1 due to rounding

a. Work in Process-Assembly 39,550

Materials Inventory 39,550

b. Work in Process-Assembly 136,500

Conversion Costs-Control 136,500

c. Finished Goods 385,287

Work in Process-Assembly 385,287

Problem 6.37

Muskoge Company
Molding Department
Physical Flow Schedule
Units to account for: Units accounted for:
From beginning work in process 10,000
Units started in February (transferred in) 25,000
Total units to account for 35,000

Total Equivalent Units

Direct Materials 25,000 Total unit cost
Conversion Costs 30,000

Cost of goods transferred out $170,500

Ending Work-in-Process $25,050
 Cost Reconciliation.

Costs to account for: Costs accounted for:

Beginning work in process $35,800 Transferred out
Costs incurred $159,750 Ending work in process
Total costs to account for $195,550 Total costs accounted for

a) Work in Process-Molding 56,250

Materials Inventory 56,250

b) Work in Process-Molding 103,500

Conversion Costs-Control 103,500

(c) Work in Process-Assembly 170,500

Work in Process-Molding 170,500

Muskoge Company
Assembly Department
Physical Flow Schedule

Units to account for: Units accounted for:

Units, beginning work in process 8,000
Units started in February (transferred in) 30,000
Total units to account for 38,000

Total Equivalent Units

Direct Materials 35,000 Total unit cost

Conversion Costs 32,500
Transferred In 30,000

Cost of goods transferred out $385,199

Ending Work-in-Process $23,350
 Cost Reconciliation
Costs to account for: Costs accounted for:
Beginning work in process $62,000 Transferred out
Costs incurred $346,550 Ending work in process
Total costs to account for $408,550 Total costs accounted for

(a) Work in Process-Assembly 39,550

Materials Inventory 39,550

(b) Work in Process-Assembly 136,500

Conversion Costs-Control 136,500

(c) Finished Goods 385,199

Work in Process-Assembly 385,199

Joint Allocation
Problem 7.34
Expected
Maintenance
Variable Rate $30,000 /(2000+4000+2000)= 3.75

% Fixed Allocated Cost

Salt Lake City 2000*3.75= $7,500 25% $60,000
Reno 4000*3.75= $15,000 50% $120,000
Portland 2000*3.75= $7,500 25% $60,000
$240,000

Baggage

Variable Rate $64,000 /(10000+15000+5000)= 1.8286

%
Salt Lake City 10000*1.8286= $18,286 33.33%
Reno 15000*1.8286= $27,429 50%
Portland 5000*18286= $9,143 16.67%

Costs
Variable Overhead Cost
 Maintenance Baggage Total
Salt Lake City $5,000 $7,500 $18,286 $30,786
Reno $10,000 $15,000 $27,429 $52,429
Portland $6,000 $7,500 $9,143 $22,643
$105,858

Actual
Maintenance % Fixed Cost Allocation
Salt Lake City 1800*3.75= $6,750 25% $158,750
Reno 4200*3.75= $15,750 50% $117,500
Portland 2500*3.75= $9,375 25% $58,750
$235,000

Baggage % Fixed Allocation Cost

Salt Lake City 8000*1.8286= $14,629 33.33% $51,995
Reno 16000*1.8286 $29,258 50% $78,000
Portland 6000*1.8286= $10,972 16.67% $26,005
$156,000

Costs
Variable Overhead Cost
Maintenance Baggage Total
Salt Lake City $6,200 $6,750 $14,629 $25,579
Reno $11,000 $15,750 $29,258 $56,008
Portland $5,800 $9,375 $10,972 $26,147
$107,734

Problem 7.35

1.Direct Method
Proportion
Power General Factory Pottery Retail
Machine Hours - - 0.69 0.31
Square Footage - - 0.4 0.6
Direct Cost $150,000 $160,000 $98,000 $56,000
($150,000) $103,500 46500
($160,000) $64,000 $96,000
$0 $0 $265,500 $198,500

2. Sequential Method
Proportion
 Power
General Factory Pottery Retail
Machine Hours - 0.1667 0.575 0.2583
Square Footage - - 0.4 0.6
Direct Cost $160,000 $150,000 $98,000 $56,000
($160,000) $26,672 $92,000 $41,328
($176,672) $70,669 $106,003
$0 $0 $260,669 $203,331

3. Reciprocal Method
Proportion
General Factory Power Pottery Retail
Machine Hours - 0.1667 0.575 0.2583
Square Footage 0.1453 - 0.3419 0.5128
Direct Cost $160,000 $150,000 $98,000 $56,000
($189,593) $31,605 $109,016 $48,972
$26,387 ($181,605) $62,091 $93,127
($3,206) $0 $269,107 $198,099

*The totals after allocation do not precisely sum to the before allocation totals due to rounding.

Problem 7.37
1. Physical Unit Method

Barrels Ratio Joint Cost Allocation

Two Oil 300000 0.5455 $5,945,950
Six Oil 170000 0.3091 $3,369,190
Distillates 80000 0.1455 $1,585,950
550000 $10,901,090
*due to rounding

2. Relative Sales Value Method

Barrels Market Price Sales Value %Sales Allocated Joint Cost

Two Oil 300000 45 $13,500,000 0.7154 $7,797,860
Six Oil 170000 25 $4,250,000 0.2252 $2,454,680
Distillates 80000 14 $1,120,000 0.0594 $647,460
550000 $18,870,000 $10,900,000

Problem 7.39
1. Physical Unit Method
 Monthly Output % Joint Cost Allocation
Studs 75000 75% $750,000
Decorative Pieces 5000 5% $50,000
Posts 20000 20% $200,000
100000 $1,000,000

2. Relative Sales Value Method

Monthly Output Sales Value %Sales Joint Cost Allocation

Studs 75000 $600,000 40% $400,000
Decorative Pieces 5000 $500,000 33.33% $333,300
Posts 20000 $400,000 26.67 $266,700
100000 $1,000,000 $1,000,000

3. Estimated Net Realizable Value

Product Market Price -Further Process Hypo. Market Price No. of Units -Further Process

Studs $8 - $8 75000 -
Decorative Pieces $100 $20 $80 5000 500
Posts $20 - $20 20000 -

Calculations
Further Processing
100 000/5 000 = $20
10% of Decorative Pieces
5000*10%= 500
 $384,000
/640000
0.6

$1,152,000
/192000
6

(0.6*480000)+(6*24800) = 436800
(0.6*147200)+(6*180000) = 1168320
or the Year Actual Overhead
400000
1605120 1232000 1632000

Under applied 26880

Journal Entry

Cost of Goods Sold 26880

Factory Overhead 26880

verhead variance is material information of Work-in-Process, Finished Goods and Cost of Goods Sold too is needed to make an

Unit Cost -Prime Unit Cost Overhead Unit Cost

$225 ($150) $75
$500 ($350) $150
 480000
630000
900000
675000
300000
180000
150000
$3,315,000

race different drivers that may contribute to products especially if they are customized or diversed.

d transferred out 121,500

n process 13,500
135,000

$28
 $50
$78

s completed and transferred out 121,500

s, ending work in process 13,500
units accounted for 135,000

$77.42 per unit

s completed and transferred out:

Started and completed 20,000
From beginning work in process 10,000
s, ending work in process 5,000
units accounted for 35000
 5.6857 per unit

sferred out 170,571

ng work in process 24,979
costs accounted for 195,550

s completed and transferred out:

Started and completed 27,000
From beginning work in process 8,000
s, ending work in process 3,000
units accounted for 38,000

11.0082 per unit

sferred out $385,287
ng work in process $23,335
costs accounted for $408,622

er by $1 due to rounding error.

s accounted for:
Units completed and transferred out:
Started and completed 20,000
From beginning work in process 10,000
Units, ending work in process 5,000
Total units accounted for 35,000

$5.7 per unit

sferred out $170,500
ng work in process $25,050
costs accounted for $195,550

s accounted for:
Units completed and transferred out:
Started and completed 27,000
From beginning work in process 8,000
Units, ending work in process 3,000
Total units accounted for 38,000

11.0133 per unit

sferred out $385,199
ng work in process $23,350
costs accounted for $408,549

*Differ by $1 due to rounding error.

d Allocated Cost

Fixed Allocated Cost

$49,995
$75,000
$25,005
$1,150,000

Fixed Overhead Cost

 Maintenance Baggage Total
$20,000 $60,000 $49,995 $129,995
$18,000 $120,000 $75,000 $213,000
$30,000 $60,000 $25,005 $115,005
$458,000

d Cost Allocation

d Allocation Cost

Fixed Overhead Cost

Maintenance Baggage Total
$22,000 $58,750 $51,995 $132,745
$17,000 $117,750 $78,000 $212,500
$29,500 $58,750 $26,005 $114,255
$459,500

Calculations
Machine Hours: Pottery 6900/(6900+3100)= 0.69
Retail 3100/(6900+3100)= 0.31
Square Footage Pottery 4000/(4000+6000)= 0.4
Retail 6000/(4000+6000)= 0.6
Calculations
Machine Hours: Power 2000/(2000+6900+3100)= 0.1667
Pottery 6900/(2000+6900+3100)= 0.575
Retail 3100/(2000+6900+3100)= 0.2583
Square Footage
*Repeated

Calculations
Let x= Fully Reciprocated General Factory
Let y= Fully Reciprocated Power
x=160000+0.1667(y)
y=150000+0.1453(x)
Solve x by substitution
x=160000+0.1667(150000+0.1453x)
x=160000+(25005+0.0242x)
x-0.0242x= 160000+25005
0.9758x= 185005
x= $189,593
Hypo. Units Hypo. Market Price % Joint Allocation
7500 $600,000 41.12% $411,200
4500 $360,000 26.47% $264,700
20000 $400,000 29.41% $294,100
$1,360,000 $1,000,000
old too is needed to make an appropriate journal entry.