- After Reviewing The New Activity Based Costing System That Nancy Chen Has Implemented At Ivc S Centerpoint Manufacturing 1 (61.42 KiB) Viewed 64 times
- After Reviewing The New Activity Based Costing System That Nancy Chen Has Implemented At Ivc S Centerpoint Manufacturing 2 (18.89 KiB) Viewed 64 times
After reviewing the new activity-based costing system that Nancy Chen has implemented at IVC's CenterPoint manufacturing facility, Tom Spencer, the production supervisor, believes that he can reduce production costs by reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliability He plans to produce 104,000 units of the Sport model and 42,000 units of the Pro model in the first quarter. He believes that with his more efficient setup routine, he can reduce the number of setup hours for both the Sport and the Pro products by 29 percent. Cost Drivers and Cost Driver Volumes-CenterPoint Manufacturing Facility Cost Driver Volume Activity Cost Driver Sport Pro Total Assembly building Assembling Machine-hours 6,480 30,400 36,800 Setting up machines Setup hours 484 Handling material Production runs 12 Packaging building Inspecting and packing Direct labor-hours 61,600 23,600 85,200 Shipping Number of shipments 104 208 312 44 440 44 56 Third Quarter Unit Cost Report, Activity-Based Costing-CenterPoint Manufacturing Facility Sport Pro Direct material $1,504,000 $2,408,000 Direct labor Assembly $ 754,000 $ 608,000 Packaging 994,000 368,000 Total direct labor $1,748,000 $ 976,000 Direct costs $3,252,000 $3,384,000 Overhead Assembly building Assembling (@$30 per MH) $ 192,000 $ 912.000 Setting up machine (@ $900 per setup hour) 39,600 396,000 Handling material (@$3,000 per run) 36,000 132,800 Packaging building Inspecting and packing (@ $5 per direct labor-hour) 308,000 '118,000 Shipping Co $1,320 per shipment) 137,280 274,560 Total ABC overhead $ 712,880 $1,832,560 Total ABC cost $3,964,880 $5,216,560 Number of units 104,000 42,000 unit cost $ 38.12 $ 124.20
Required: a. Compute the amount of overhead allocated to the Sport and the Pro drones for the first quarter using activity-based casting. Assume that all events are the same in the first quarter as in the third quarter except for the number of setup hours. Assume the cost of a setup hour remains at $900, Model Total ABC Overhead Sport Pro