6-33 Comprehensive problem with ABC costing. Pet Transport Company makes two pet

Question

6-33 Comprehensive problem with ABC costing. Pet Transport Company makes two pet carriers, the at-allac and the Dog-eriffic. They are both made of plastic with metal doors, but the Cat-allac is smaller Information for the two products for the month of April is given in the following ta bles: Input prices Direct materials S4 per pound S3 per pound S10 per direct manufacturing labor hour Plastic Metal Direct manufacturing labor Input quantities per unit of output Direct materials Cat-allac Dog-eriffic 4 pounds 0.5 pounds 3 hours 10 MH 6 pounds 1 pound 5 hours 18 MH Plastic Metal Direct manufacturing labor-hours (DMLH) Machine-hours (MH) Inventory information, direct materials Beginning inventory Target ending inventory Cost of beginning inventory Plastic 250 pounds 380 pounds S950 Metal 60 pounds 55 pounds S180 Pet Transport accounts for direct materials using a FIF0 cost flow assumption. Sales and inventory information, finished goods Cat-allac Dog-eriffic Expected sales in units Selling price Target ending inventory in units Beginning inventory in units 500 S160 35 15 S1,500 300 S250 15 30 Beginning inventory in doilars S5,580

Explanation / Answer

5. Manufacturing overhead cost budgets for each of the three activities Machine Setup overhead Cat-allac Dog-errific Total Units to be produced 520 285 Units per batch 20 15 Number of batches 26 19 Setup time per batch 1.5 1.75 Total setup time 39 33.25 72.25 Budgeted machine setup costs = $100 per setup hour x 72.25 hrs                                                                 = $7225 Processing Overhead Budgeted machine hours = (10MH per unit x 520 units) + (18 MH per unit x 285 units)                                                      = 5200 MH + 5130 MH = 10330 MH Budgeted processing cost = $5 per MH x 10330 MH                                                      = $51650 Inspection overhead Budgeted inspection hours = (0.5 x 26 batches) + (0.6 x 19 batches)                                                        = 13 + 11.4 = 24.4 inspection hours Budgeted inspection cost = $16 per inspection hour x 24.4 inspection hours                                                      = $390.40 Manufacturing Overhead budget For the month of April Machine setup cost $7,225 Processing costs $51,650 Inspection costs $390.40 Total costs $59,265 6. Unit cost of Ending Finished Goods Inventory April 30, 20XX Cat-allac Dog-errific Cost per unit of Input Input per unit of output Total Input per unit of output Total Plastic $4 4lbs $16.00 6lbs $24.00 Metal 3 0.5lbs $1.50 1lbs $3.00 Direct manufacturing labour 10 3hrs $30.00 5hrs $50.00 Machine Setup 100 0.075hrs $7.50 0.1167hrs $11.67 Processing 5 10MH $50.00 18MH $90.00 Inspection 16 0.025hrs $0.40 0.04hrs $0.64 Total $105.40 $179.31 Ending Inventories Budget April 30, 20XX Quantity Cost per unit Total Direct Materials Plastic 380 $4 $1,520 Metal 55 $3 $165 $1,685 Finished Goods Cat-allac 35 $105.40 $3,689.00 Dog-errific 15 $179.31 $2,689.65 $6,379 Total ending inventory $8,064 7. Cost of Goods Sold Budget For the month of April, 20XX Beginning finished goods inventory $7,080 Direct materials used $16,745 Direct manufacturing labour $29,850 Manufacturing overhead $59,265 Cost of goods manufactured $105,860 Cost of goods available for sale $112,940 Less: Ending finished goods inventory $6,379 Cost of Goods Sold $106,561 8. Nonmanufacturing cost budget for the month of April, 20XX Salaries (18000 + (18000 x 5%) $18,900 Other fixed costs $18,000 Sales Commission($155000 x 1%) $1,550 Total nonmanufacturing cost $38,450

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