CHAPTER13: Activity-Based Costing

1 B
2 D
3 C
4 D
5 C
6 D
7 D
8 D
9 D
10 D
11 D
12 D
13 C
14 C
15 D
16 A
17 B
18 C

Solutions:
8 Activity cost pools Activity cost rate Activity
Serving clients 30 1
Machine set-up 10 2
Printing 2.5 500

9 Salaries 12000
Computer Lease 4000
Telecommunication charges 36000
52000 D

10 Total cost 3120000

Total units 24000
Cost per unit 130 D

11 Salaries 12000
Computer Lease 4000
Telecommunication charges 27000
43000 D
12 Set-up cost to be allocated 80000

AB BC
Units produced 12000 18000
Batch size in units 20 40

Set-up cost 20000 60000

13 Order size activity:

Manufacturing overhead 84000
Selling, general and administrative 90000
174000

14 Customer support activity:

Manufacturing overhead 294000
Selling, general and administrative 54000
348000

15 Manufacturing overhead 42000

Selling, general and administrative 36000
78000

16 Activity cost pools Activity cost rate Activity

Machine setup 40 5
Inspections 30 10
Material Handling 10 20
Engineering 20 10
TOTAL OVERHEAD- Job 210

17 Activity cost pools Activity cost rate Activity

Machine setup 40 5
Inspections 30 20
Material Handling 10 30
Engineering 20 10
TOTAL OVERHEAD- Job 220

Direct materials 9000

Direct labor 13500
Overhead 1300
 Total cost 23800
Divide by: units completed 140
Cost per unit- Job 220 170 B

18 Activity cost pools Activity cost rate Activity

Machine setup 40 10
Inspections 30 20
Material Handling 10 40
Engineering 20 20
TOTAL OVERHEAD- Job 230

Direct materials 10000

Direct labor 15000
Overhead 1800
Total cost 26800
Divide by: units completed 200
Cost per unit- Job 230 134
Multiply by: Markup cost percentage 150%
Selling price 201 C
Cost
30
20
1250
1300 D
D

Cost
200
300
200
200
900 A

Cost
200
600
300
200
1300
Cost
400
600
400
400
1800
Given:
Activity cost pool Producing units Processing units Customer support Other
Indirect factory wages 40% 30% 20% 10%
Other factory overhead 20% 30% 50%
Selling and admin exp 30% 20% 50%

A.
Allocation:
Activity cost pool Producing units Processing units Customer support Other
Indirect factory wages 32000 24000 16000 8000
Other factory overhead 30000 45000 75000
Selling and admin exp 60000 40000 100000
62000 129000 56000 183000

B.
Activity cost pool Annual Activity Overhead costs Activity Rate
Indirect factory wages 3000 machine hours 62000 20.67
Other factory overhead 2000 orders 129000 64.5
Selling and admin exp 500 customers 56000 112
247000

C. Cost Drivers Activity Rate Cost

Producing units 1800 20.67 37200
Processing units 100 64.5 6450
Customer support 25 112.00 2800
46450

D.
Sales 288000
Cost:
Direct materials 60000
Direct labor 24000
Manufacturing overhead 46450 130450
Gross Margin of Product LEX 157550
Total Cost
100% 80000
100% 150000
100% 200000
430000

Total
80000
150000
200000
430000