Blog

Answer & Explanation:E 17. 15Spear Custom Furniture uses an activity-based cost accounting system to apply overhead to production.The company maintains four overhead cost pools. The four cost pools, and their budgetedamounts for the upcoming period, are as follows:Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,000Materials handling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000Set-ups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000Quality control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000Four cost drivers are used by Spear to allocate its overhead cost pools to production. The four costdrivers, and their budgeted total levels of activity for the upcoming period, are shown below:Machine hours (to allocate maintenance costs) . . . . . . . . . . . . . . . . . . . . . . . 600 hoursMaterial moves (to allocate materials handling costs) . . . . . . . . . . . . . . . . . . 400 movesSet-ups (to allocate set-up costs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 set-upsNumber of inspections (to allocate quality control costs) . . . . . . . . . . . . . . . . 300 inspectionsThe company has been asked by Cosmopolitan University to submit a bid for tables to be used in anew computer lab. The plant manager feels that obtaining this job would result in new business infuture years. Estimates for the Cosmopolitan University project are as follows:Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,000Direct labor (500 hours) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,000Number of machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60Number of material moves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Number of set-ups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Number of inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2a. Estimate the total cost of manufacturing the tables for Cosmopolitan University.b. Determine the company’s bid price if bids are based upon the total estimated manufacturingcost of a particular project,

plus 75 percent.E18.10Accessory World makes floor mats for the automobile industry. Finished sets of mats must passthrough two departments: Cutting and Coating. Large sheets of synthetic material are cut to size inthe Cutting Department and then transferred to the Coating Department, where each set is sprayedwith a chemical coating for improved durability. The following information pertains to May activityin the Cutting Department:Cost data:Total cost of beginning inventory on May 1 . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,800Direct materials costs incurred in May. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000Conversion costs incurred in May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,200Physical units data:Units in process, May 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 setsUnits started in May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 setsUnits in process, May 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 setsPercentage of completion data:Direct materials, May 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%Conversion, May 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80Direct materials, May 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%Conversion, May 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20a. Prepare a schedule showing: (1) the number of mat sets transferred from the Cutting Departmentto the Coating Department in May, and (2) the number of mat sets started and completedby the Cutting Department in May.b. Compute the equivalent units of input resources for the Cutting Department in May.c. Compute the cost per equivalent unit of input resource for the Cutting Department in May.d. Prepare the summary journal entry required to transfer the cost of completed mat sets from theCutting Department to the Coating Department in May.e. Compute the total cost assigned to the Cutting Department’s ending inventory on May 31.Write a 350-word paper that compares and contrasts the approaches to costing in E17.15 and E18.10.  Distinguish production procedures that match with process costing from those that correspond with job order costing. Additionally, explain how job order costing, when used in conjunction with activity-based costing, can contribute to the allocation of indirect costs