SOLUTIONS - Quiz #4 : TA #7

Name _______________ Date ________________ Section ______________ Quiz 4 Show all work to receive credit. Circle your final answer. Harbor Pastries makes cookies. Currently, the company uses a plant-wide manufacturing overhead rate and uses direct labor hours as its allocation base. The company has thought about implementing an ABC costing system. It reports the following cost estimates: Activity Budgeted cost Cost driver Cost driver usage Mixing dough $213,000 Direct labor hours 24,000 hours Baking $300,000 Oven hours 30,000 hours Packaging $165,000 Number of cookies 425,000 cookies 1. What is Harbor Pastries? manufacturing overhead rate under its current costing system in which it uses a plant-wide manufacturing overhead rate? (1 point) MOH rate = Total estimated MOH / Total estimated direct labor hours Total estimated MOH=$213,000 + 300,000 + 165,000 =678,000 MOH rate = 678,000 / 24,000 = $28.25 per DL hour 2. Using the plant-wide manufacturing overhead rate, how much manufacturing overhead would be allocated to a job that requires 210 direct labor hours? (1 point) MOH rate x actual direct labor hours $28.25 x 210 = $5932.50 3. If Harbor Pastries implemented the ABC costing system, what would be the manufacturing overhead rate for each of the three activities? (3 points) Mixing dough: 213,000 / 24,000 = $8.88 per DL hour Baking: 300,000 / 30,000 = $10 per oven hour Packaging: 165,000 / 425,000 = $0.39 per cookie Harbor Pastries receives an order for 900 chocolate chip cookies. The cookies require 16 direct labor hours and 20 oven hours. Direct material costs for the cookie order are $130. Direct labor costs are $35 per hour. 4. Compute the total cost of this order. (2 points) DM $130 DL $35 x 16 = $560 MOH $8.88 x 16 = 142.08 $10 x 20 =200 $0.39 x 900 = 351 Total MOH $693.08 Total cost $1383.08 5. If the company charges its customer 300% of direct labor costs incurred, what is Harbor Pastries? operating income for the 900 cookie order? (1 point) Revenue ? Total cost (300% x $560) - $1383.08 $1680 ? $1254.76 = $296.92 Identify the following costs as prevention, appraisal, internal failure or external failure (2 points): 6. Cost to dispose of defective units Internal failure 7. Cost of additional employee training Prevention 8. Lost productivity due to machine breakdown Internal failure 9. Litigation costs from product liability claims External failure Kelly Steffes Name _______________