18 Pasternik Company produces and sells two products, Alpha and Zeta. The follow
ID: 2500126 • Letter: 1
Question
18 Pasternik Company produces and sells two products, Alpha and Zeta. The following information is available relating to its setup activities: Alpha Zeta Units produced 350 27,180 Batch size (units) 13 690 Total direct labor hours 1,390 52,860 Cost per setup $2,840 $2,820 Use of activity-based costing would allocate the following amounts of setup cost to each unit (rounded to the nearest cent): ABC TC A) $6.16 $7.16 B) $86.76 $8.54 C) $88.76 $10.54 D) $4.16 $5.16 E) $46.46 $7.85 Assume the cost per setup remains at $2,820 but that the batch size for product Alpha is changed from 13 to 34 units per batch Using activity-based and a volume-based overhead costing that uses direct labor-hours to assign overhead, the amount of setup cost applied to each unit of product Alpha would be (rounded to the nearest cent): 21 The Long Term Care Plus Company has two service departments — actuarial and premium rating, and two production departments — marketing and sales. The distribution of each service department's efforts to the other departments is shown below: FROM TO Actuarial Rating Marketing Sales Actuarial 0.0% 50.0% 20.0% 30.0% Rating 29.0% 0.0% 43.7% 27.3% The direct operating costs of the departments (including both variable and fixed costs) were as follows: Actuarial $69,000 Rating $46,000 Marketing $70,000 Sales $81,000 The total cost accumulated in the marketing department using the step method is: 18 Pasternik Company produces and sells two products, Alpha and Zeta. The following information is available relating to its setup activities: Alpha Zeta Units produced 350 27,180 Batch size (units) 13 690 Total direct labor hours 1,390 52,860 Cost per setup $2,840 $2,820 Use of activity-based costing would allocate the following amounts of setup cost to each unit (rounded to the nearest cent): ABC TC A) $6.16 $7.16 B) $86.76 $8.54 C) $88.76 $10.54 D) $4.16 $5.16 E) $46.46 $7.85 Assume the cost per setup remains at $2,820 but that the batch size for product Alpha is changed from 13 to 34 units per batch Using activity-based and a volume-based overhead costing that uses direct labor-hours to assign overhead, the amount of setup cost applied to each unit of product Alpha would be (rounded to the nearest cent): 21 The Long Term Care Plus Company has two service departments — actuarial and premium rating, and two production departments — marketing and sales. The distribution of each service department's efforts to the other departments is shown below: FROM TO Actuarial Rating Marketing Sales Actuarial 0.0% 50.0% 20.0% 30.0% Rating 29.0% 0.0% 43.7% 27.3% The direct operating costs of the departments (including both variable and fixed costs) were as follows: Actuarial $69,000 Rating $46,000 Marketing $70,000 Sales $81,000 The total cost accumulated in the marketing department using the step method is:Explanation / Answer
18.
(a)
Alpha product
Total units produced = 350 units
Batch size = 13 units
No. of setups = Units produced / Batch size = 350/13 = 27
Cost per setup = $2,840
Total setup cost = $2,840 * 27 = $76,680
Setup cost per unit = $76,680 / 350 = $219 per unit
Zeta product
Total units produced = 27,180 units
Batch size = 690 units
No. of setups = Units produced / Batch size = 27,180/690 = 40 setups
Cost per setup = $2,820
Total setup cost = $2,820 * 40 = $112,800
Setup cost per unit = $112,800 / 27180 = $4.15 per unit
(b)
Alpha Activity based
No. of setups = 350/34 = 11
Total setup cost = $2,820 * 11 = $31,020
Setup cost per unit = $31,020 / 350 = $88.63
Alpha volume based
Total setup cost of alpha = $31,020
Total setup cost of zeta = $112,800
Total setup cost = $31,020 + $112,800 = $143,820
Total direct labour hours = 1390 + 52860 = 54,250
Setup cost per direct labour hour = $143,820 / 54,250 = $2.65
Direct labour hours of alpha product = 1390
Setup cost of alpha = 1390 * $2.65 = $3,683.50
Setup cost per unit = $3,683.50 / 350 = $10.52
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