ACC 227 ACC227 Module 3 Homework Assignment Solution (AAU Online)

ACC 227 ACC227 Module 3 Homework Assignment Solution (AAU Online)

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Part I: Short Response

1.What must a company do in order to be able to assign overhead costs to specific overhead activities?

2.What are the four general categories of ABC activities?

3.What is a cost driver?

4.How are facility support overhead costs treated in an ABC system?

5.What are the two characteristics of a good management accounting measure?

6.Cassi Company expects to use 400,000 direct labor hours in the production of its only product.  Using a traditional overhead allocation system based on direct labor hours and the following manufacturing overhead costs for the year, compute the manufacturing overhead allocation rate.

7.David's Robotics Company manufactures three products.  Profit computations for these products for the most recent year are listed in the chart below.  David's Robotics traditionally allocates manufacturing overhead based on the level of direct labor cost – $2 of manufacturing overhead are allocated for each $1 of direct labor cost.  However, of the company's $1,000,000 in manufacturing overhead costs, $700,000 is directly related to the number of product batches produced during the year.  The number of batches of the three products for the year was as follows: Bender Model, 20 batches; Calculon Model, 30 batches; Flexco Model, 50 batches.  The remaining $300,000 in overhead is for facility support (property taxes, security costs, general administration, and so forth).  In an effort to reduce or eliminate the total company loss ($120,000), David's Robotics has decided to drop Flexco Model.  What would total company profit (or loss) have been in the most recent year if Flexco Model had been dropped at the beginning of the year?

Part II: Application

Directions: Please complete the following exercises from your textbook:

1.Exercise 17-18 “Computing Profit Using ABC” (pp. 855-856)

2.Exercise 17-20 “Allocating Batch-Level and Product-Line Manufacturing Overhead Costs” (pp. 856-857)

3.Exercise 17-28 “Allocating Unit-Level, Batch-Level, and Product-Line Manufacturing Overhead Costs” (p. 861)

4.Exercise 17-30 “Manufacturing Overhead Allocation with Multiple Products” (p. 863)


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