Chapter 17: Problem Set B

These problems each tackle overhead allocation methods like plantwide rates, departmental rates, and activity-based costing (ABC), with additional steps for calculating product costs and gross profit per unit. Here’s a guide on how to approach each problem. Problem 17-1B: Comparing Plantwide Rate Method and ABC 1. Single Plantwide Overhead Rate Calculation: o Use machine hours as the basis to calculate the plantwide overhead rate: Plantwide Overhead Rate=Total Budgeted Overhead Cost 2. Allocate Overhead Using Plantwide Rate: o Multiply the plantwide overhead rate by machine hours used by Job 55 and Job 66 to determine allocated costs. 3. Activity Rate Calculation for ABC: o For each activity, compute the rate as follows: Activity Rate=Total Cost of the Activity 4. Allocate Overhead Using ABC: o Multiply the activity rate by each job’s usage for each cost driver. Problem 17-2B: Plantwide Overhead Rate and Gross Profit Calculation 1. Plantwide Overhead Rate Calculation: o Use the budgeted direct labor hours to calculate the plantwide rate: Plantwide Overhead Rate=Total Budgeted Overhead Cost 2. Overhead Cost per Unit: o Multiply the plantwide rate by direct labor hours per unit for Extra Fine and Family Style salsa types. 3. Product Cost per Unit: o Sum direct material, direct labor, and overhead costs per unit for each salsa type. 4. Gross Profit per Unit: o Subtract product cost per unit from the selling price per unit. Problem 17-3B: Activity-Based Costing, Product Cost, and Gross Profit 1. Compute ABC Activity Rates: o For each activity, calculate the rate using: Activity Rate=Total Activity Cost Total Activity Driver Usage 2. Allocate Overhead to Each Product Using ABC: Allocate overhead by multiplying each activity rate by actual usage for Extra Fine and Family Style units. 3. Compute Product Cost per Unit: o Sum direct materials, direct labor, and allocated overhead per unit. 4. Gross Profit per Unit: o Subtract product cost per unit from the selling price per unit. o Problem 17-4B: Departmental Overhead Rate, Product Cost, and Gross Profit 1. Departmental Overhead Rate Calculation: o Use machine hours to allocate Fabricating costs and direct labor hours for Assembly costs: Fabricating Rate=Fabricating OverheadTotal Machine Hours 2. Allocate Overhead per Unit for Each Model: o Multiply each departmental rate by the actual usage for machine hours (Fabricating) or direct labor hours (Assembly) for ProPower and Crunch models. 3. Compute Product Cost per Unit: o Add direct materials, direct labor, and overhead to find total product cost per unit. 4. Compute Gross Profit per Unit: o Subtract the product cost per unit from the selling price per unit. Problem 17-5B: ABC for a Service Company 1. Compute Activity Rates: o Use the cost driver for each activity to calculate activity rates: Activity Rate=Activity Cost Total Cost Driver Usage 2. Allocate Overhead to Service Lines: o Multiply each activity rate by the actual usage for each service line (Litigation support and Fraud investigation). 3. Compute Overhead Cost per Case: o Divide total allocated overhead for each service line by the number of cases. Would you like specific examples of calculations for any of these steps, or are there certain aspects of the problems you’d like more detail on?