- The Controller Has Asked You To Compare Plant Wide Department And Activity Based Cost Allocation Triton Budgeted Info 1 (42.66 KiB) Viewed 34 times
- The Controller Has Asked You To Compare Plant Wide Department And Activity Based Cost Allocation Triton Budgeted Info 2 (70.98 KiB) Viewed 34 times
- The Controller Has Asked You To Compare Plant Wide Department And Activity Based Cost Allocation Triton Budgeted Info 3 (62.41 KiB) Viewed 34 times
- The Controller Has Asked You To Compare Plant Wide Department And Activity Based Cost Allocation Triton Budgeted Info 4 (48.62 KiB) Viewed 34 times
- The Controller Has Asked You To Compare Plant Wide Department And Activity Based Cost Allocation Triton Budgeted Info 5 (37.67 KiB) Viewed 34 times
Tribute Inc. makes two styles of trophies, basic and deluxe, and operates at capacity. Tribute does large custom orders. Tribute budgets to produce basic trophies and deluxe trophies. Manufacturing takes place in two production departments forming and assembly In the forming department, indirect manufacturing costs are accumulated in two cost pools, set up and general overhead. In the assembly department, al indirect manufacturing costs are accumulated in one general overhead cost pool. The basic trophies are formed in batches of but because of the more intricate detail of the deluxe trophies, they are formed in batches of Click the icon to view budgeted information.) Read the requirements A refined costing system reduces the use of broad averages for assigning the cost of resources to cost objects (such as jobs, products, and services) and provides better measurement of the costs of indirect resources used by different cost objects, no matter how differently various cost objects use indirect resources. In this exercise we will determine the budgeted cost of trophies and plaques first based a single plant-wide overhead rate and then on a departmental overhead rate using activity-based costing There are three main guidelines for refining a costing system 1. Direct-cost tracing Aims to reduce the amount of costs classified as indirect, thereby minimizing the extent to which costs have to be allocated rather than traced. 2. Indirect-cost pools. Expand the number of indirect-cost pools until each pool is more homogeneous. Al costs in a homogeneous cost pool have the same or a similar cause-and-effect (el benefits-received relationship with a single cost driver that is used as the cost-allocation base 3. Cost-allocation bases. Whenever possible, managers should use the cost driver (the cause of indirect costs) as the cost-allocation basis for each homogeneous indirect-cost pool (the effect) Requirement 1. Calculate the budgeted unit cost of basic and deluxe trophies based on a single plant-wide overhead rate, total overhead is allocated based on total direct costs. (Don't forget to include direct material and direct manufacturing labor cost in your unit cost calculation.) Start by calculating the total direct costs for the basic and deluxe trophies departments Basic Deluxe Total Direct materials Forming Assembly Total direct materials Direct manufacturing labor Forming Assembly Total direct manufacturing labor Total direct costs Next calculate the budgeted overhead rate for total overhead allocated based on total direct costs. Remember that total Overhead costs consists of setup and general overhead costs for the departments. (Round your answer to the nearest cent sxxx. Abbreviations used. DC - Direct cost, DL = Direct labor, $ = dollar.) Total overhead costs Total direct costs Budgeted overhead rate 280 200 (1) Now calculate the overhead allocated for the basic and deluxe using the budgeted overhead rate that was calculated above. Remember that the overhead costs for the two departments are allocated based on the total direct costs calculated above. Round your answers to the nearest whole dollar)
Total direct costs Total allocated overhead ate • Allocated overhead Basic Deluxe Finally, calculate the budgeted unit cost of basic and deluxe trophies based on a single plant-wide overhead rate, total overhead is allocated based on total direct costs. Remember the cost is calculated using the total costs divided by the total number of trophies produced (Round your final answer to the nearest cont, $XXO) Basic Deluxe Total Total direct costs Allocated overhead Total costs Unit cost Requirement 2. Calculate the budgeted unit cost of basic and deluxe trophies based on departmental overhead rates, where forming department overhead costs are allocated based on direct manufacturing labor costs of the forming department and assembly department overhead costs are allocated based on total direct manufacturing labor costs of the assembly department Start by calculating the budgeted overhead rate for the forming and assembly departments based on direct manufacturing labor costs Remember the budgeted overtad costs consist of setup and general overhead costs. (Round the budgeted overhead rates to the nearest cent, SX.XX.) Budgeted overhead costs • Budgeted direct labor costs Budgeted overhead rate Forming per DLS Assembly per DLS Finally, calculate the unit cost for the basic and deluxe trophies. Remember the unit cost is calculated using the total costs divided by the total number of trophies produced. (Round your final answer to the nearest cent. 5x.xx) Basic Deluxe Total Total direct costs Allocated overhead Forming Department Assembly Department Total costs Unit cost Requirement 3. Calculate the budgeted unit cost of basic and deluxe trophies Tribute alocales overhead costs in each department using activity-based costing, where selup costs are allocated based on number of batches and general overhead costs for each department are allocated based on direct manufacturing labor costs of each department One of the best tools for refining a costing system is activity-based costing Activity-based costing (ABC) rofines a costing system by identifying individual activities as the fundamental cost objects. An activity is an event task of unit of work with a specified purpose for example, designing products, setting up machines, operating machines, and distributing products. More informally, activities are verbs, they are things that a firm does. To help make strategic decisions, ABC systems identity activities in all functions of the value chain, calculate costs of individual activities, and assign costs to cost objects such as products and services on the basis of the mix of activities needed to produce each product or service. Begin by calculating the budgeted setup rate for the forming department. Remember to calculate the total number of batches for each style of trophies. Tribute budgets to produce 10,000 basic trophies formed in batches of 200, and budgets to produce 5.000 deluxe trophies formed in batches of 50. Round your answer to the nearest whole dollar) Budgeted setup costs Budgeted number of batches Budgeted setup rate Forming per batch
$ = Now calculate the budgeted general overhead rate for the forming and the assembly departments (Round your answer to the nearest cent SX.XX. Abbreviations used: DC - Direct cost, DL = Direct labor. $ = dollar) Budgeted general overhead Budgeted direct labor costs - Budgeted supervision rate Forming per DLS Assembly per DLS Now we can calculate the setup allocated overhead costs for the forming department for both the basic and deluxe trophies (Round your answers to the nearest whole dollar) Setup Budgeted overhead rate * Budgeted number of batches - Allocated overhead Basic Deluxe Now consider the general overhead costs. Using the budgeted supervision rate determined above, calculate the amount of general overhead costs to allocate for each department for the basic and deluxe trophies (Round your answers to the nearest whole dolar) General overhead Budgeted overhead rato * Budgeted direct labor costs = Allocated overhead Basic Deluxe Calculate the budgeted cost of basic and deluxe trophies il Tribute allocates overhead costs in each department using activity-based costing Basic Deluxe Total Direct materials $ $ Direct manufacturing labor Total direct cost Allocated overhead: Forming department Setup General overhead Assembly department General overhead Total costs Finally, calculate unit cost for the basic and deluxe trophies. Remember to use the calculation from Requirement 1 and 2 for the unit costs (Round your final answer to the nearest cent, $X.XX.) Basic Deluxe Total Total direct costs Allocated overhead Total costs Unit cost Requirement 4. Explain briefly why plant-wide, department, and activity-based costing systems show different costs for the basic and deluxe trophies. Which system would you recommend and why? Review the following summary table s
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