1. ABC problem backpacks, purses homework Activity Based Costing Problem Elliot

Question

1. ABC problem backpacks, purses homework

Activity Based Costing Problem

Elliot Page, Inc. manufactures and sells two products, backpacks and purses. Annual sales in units of each, labor time per unit and total manufacturing time per year are described below:

Hours

Backpacks: 2,000 units * 5 hrs 10,000
Purses: 10,000 units * 4 hrs. 40,000

Total hours 50,000

Backpacks Purses

Direct materials $25 $17

Direct labor 30 24

Total overhead $800,000

Breakdown of overhead costs:

Estimated Total Backpacks Purses
Costs Activity

Labor related (labor hours) $ 80,000 50,000 10,000 40,000

Machine setups(# of setups) 150,000 5,000 3,000 2,000

Product testing (# of tests) 160,000 8,000 5,000 3,000

Production orders(# of orders 70,000 400 100 300

Material receipts (# of receipts) 90,000 750 150 600

General factory (machine hrs) 250,000 40,000 12,000 28,000

Try to do the following and we will review in class:

Determine the overhead that would be used if Elliot Page, Inc. used standard costing
Determine the product cost for backpacks and purses using the standard rate total cost per unit.
Determine the overhead rate for each of the six activity centers
Determine the amount of overhead allocated to each product using Activity Based osting.
Determine the overhead cost per unit using Activity Based osting.
Determine the total cost per unit using Activity Based Costing.

Explanation / Answer

Part A)

The overhead rate (standard costing) can be calculated with the use of following formula:

Overhead Rate (Standard Costing) = Total Estimated Overheads/Total Hours

_________

Using the information provided in the question, we get,

Overhead Rate (Standard Costing) = 800,000/50,000 = $16 per hour

_________

Part B)

The total product cost per unit for backpacks and purses is calculated with the following table:

_________

Part C)

The overhead activity rate for six activity centers is calculated with the use of following table:

_________

Part D)

The amount of overhead allocated to each product using ABC is calculated as follows:

_________

Part E)

The overhead cost per unit with ABC is calculated with the use of following table:

_________

Part F)

The total cost per unit with ABC is calculated with the use of following table:

Backpacks Purses Direct Material 25 17 Direct Labor 30 24 Overhead 80 (5 Hours*16) 64 (4 Hours*16) Total Product Cost Per Unit $135 $105

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.