Production-Based Costing versus Activity-Based Costing, Assigning Costs to Activities, Resource Drivers Willow Company p

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Production-Based Costing versus Activity-Based Costing,
Assigning Costs to Activities, Resource Drivers
Willow Company produces lawn mowers. One of its plants produces
two versions of mowers: a basic model and a deluxe model. The
deluxe model has a sturdier frame, a higher horsepower engine, a
wider blade, and mulching capability. At the beginning of the year,
the following data were prepared for this plant:
Additionally, the following overhead activity costs are
reported:
* Receiving activity cost includes allocated share of forklift
operators’ salaries.
Facility-level costs are allocated in proportion to machine
hours (provides a measure of time the facility is used by each
product). Receiving and materials handling use three inputs: two
forklifts, gasoline to operate the forklift, and three operators.
The three operators are paid a salary of $40,000 each. The
operators spend 25% of their time on the receiving activity and 75%
on moving goods (materials handling). Gasoline costs $3 per move.
Depreciation amounts to $8,000 per forklift per year.
Required:
(Note: Round answers to two decimal
places.)
1. Calculate the cost of the materials
handling activity. Label the cost assignments as driver tracing or
direct tracing. Identify the resource drivers.
Direct tracingDriver tracing with timeDriver tracing with
moves
Direct tracingDriver tracing with timeDriver tracing with
moves
Direct tracingDriver tracing with timeDriver tracing with
moves
2. Calculate the cost per unit for each
product by using direct labor hours to assign all overhead costs.
(Round your answers to two decimal places.)
Plantwide overhead rate: $fill in the blank
f4eb3802f07006f_1 per DLH
3. Calculate activity rates and assign
costs to each product. Calculate a unit cost for each product, and
compare these costs with those calculated in Requirement 2. (Round
acitivity rates and unit costs to two decimal places and all other
answers to the nearest whole dollar value.)
Note: Be sure to complete both tables
below before answering the following question:
The
ABCtraditional
costs are a closer representation of actual resource
consumption.
4. Calculate consumption ratios for each
activity. (Round your answers to two decimal places.)
5. CONCEPTUAL CONNECTION Explain how the
consumption ratios calculated in Requirement 4 can be used to
reduce the number of rates. (a) Complete the statement below
regarding when products consume activities.
When products consume activities in
the same proportionvarying proportions
, the activities can be combined into
a single overhead rateone poola single activity driver
. Using these consumption ratios as a guide, we create
onefoureight
pools.
(b) Calculate the rates that would apply under this approach.
(Round to two decimal places.)
Overhead rate 1Pool 1Activity Driver 1
Overhead rate 2Pool 2Activity Driver 2
Overhead rate 3Pool 3Activity Driver 3
Overhead rate 4Pool 4Activity Driver 4