Reference no: EM13851492

Stage 2 ABC for Manufacturing: Reassigning Costs to Cost Objectives

National Technology,LTD. has developed the following activity cost information for its manufacturing activities:

Activity Activity cost

Machine setup $65.00 per batch

Movement 15 per batch move

0.1 per pound

Drilling 4 per hole

Welding 4 per inch

Shaping 25 per hour

Assembly 17 per hour

Inspection 2 per unit

Filling an order for a batch of 50 fireplace inserts (each insert weighing 150 pounds) required the following:

Three batch moves

Two sets of inspections

Drilling five holes in each unit

Completing 80 inches of welds on each unit

Thirty minutes of shaping for each unit

One hour of assembly per unit

Determine the activity cost of converting the raw materials into 50 fireplace inserts.

Indirect Cost Allocation: Direct Method

Sprint Manufacturing Company has two production departments, Melting and Molding. Direct general plant management and plant security costs benefit both production departments. Sprint allocates general plant management costs on the basis of the number of production employees and plant security costs on the basis of space occupied by the production departments. In November, the following overhead costs were recorded:

Melting Department direct overhead $175,000

Molding Department direct overhead 300,000

General plant management 90,000

Plant security 35,000

Melting Molding

Number of employees 25 45

Space occupied (square feet) 10,000 40,000

Machine hours 10,000 2,000

Direct labor hours 4,000 20,000

(a) Prepare a schedule allocating general plant management costs and plant security costs to the Melting and Molding Departments. (Round your answer to the nearest whole number. Do not round until your final answer.)

Department Total Melting Molding

General Plant Management $ $ $

Plant security $ $ $

(b) Determine the total departmental overhead costs for the Melting and Molding Departments.

Melting $ $

Molding $ $

(c) Assuming the Melting Department uses machine hours and the Molding Department uses direct labor hours to apply overhead to

production, calculate the overhead rate for each production department. (Round your answers to two decimal places.)

Melting $ $

Molding $ $

Interdepartment Services: Step Method

Tucson Manufacturing Company has five operating departments, two of which are producing departments (P1 and P2) and three of which are service departments (S1, S2, and S3). All costs of the service departments are allocated to the producing departments. The following table shows the distribution of services from the service departments.


Services provided

from Services Provided to

S1 S2 S3 P1 P2

S1 -- 5% 25% 50% 20%

S2 10% -- 5 45 40

S3 15 5 -- 20 60

The direct operating costs of the service departments are as follows:

S1 $49,000

S2 93,500

S3 18,000

Refer to the data above. Using the step method, prepare a schedule for Tucson Manufacturing Company allocating the service department costs to the producing departments. (Round calculations to the nearest dollar. Do not round until your final answers.)


Service Departments

Producing Departments

S1 S2 S3 P1 P2

Total costs 0 0 0 $ $