‫المذكرة الثالثة‬ Cost accounting 2

CH2-activity based costing &

activity-based management
Ex 2-5:
1-

Trophies Plaques Total

Direct materials
Forming $13,000 $11,250
Assembly 2,600 9,375
Total 15,600 20,625
Direct Labor
Forming 15,600 9,000
Assembly 7,800 10,500
Total 23,400 19,500
Total direct costs $39,000 $40,125 $79,125

($12,000+ $10,386+ $23,000+ $10,960) $56,346

Budgeted overhead rate = = = $0.712114 per dollar of direct cost
$79,125 $79,125

Trophies Plaques Total

Direct materials $15,600 $20,625 $ 36,225
Direct labor 23,400 19,500 42,900
Total direct cost 39,000 40,125 79,125
Allocated overhead* 27,772 28,574 56,346
Total costs $66,772 $68,699 $135,471
*Allocated overhead = Total direct cost X Budgeted overhead rate (0.712114).

2-
Forming department:
𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝐹𝑜𝑟𝑚𝑖𝑛𝑔 𝐷𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡 𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑐𝑜𝑠𝑡𝑠
Budgeted overhead rate =
𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝐹𝑜𝑟𝑚𝑖𝑛𝑔 𝐷𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡 𝑑𝑖𝑟𝑒𝑐𝑡−𝑙𝑎𝑏𝑜𝑟 𝑐𝑜𝑠𝑡𝑠

$12,000+$10,386 $22,386
= = = $0.91 per direct-labor dollar.
$15,600+ $9,000 $24,600

Allocated overhead for Trophies = 15600 X 0.91 = $14196.

Allocated overhead for Trophies = 9000 X 0.91 = $8190.

Assembly department:
𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝐴𝑠𝑠𝑒𝑚𝑏𝑙𝑦 𝐷𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡 𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑐𝑜𝑠𝑡𝑠
Budgeted overhead rate =
𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝐴𝑠𝑠𝑒𝑚𝑏𝑙𝑦 𝐷𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡 𝑑𝑖𝑟𝑒𝑐𝑡 𝑐𝑜𝑠𝑡𝑠

$23,000+ $10,960 $33,960

= = = $1.121718 per direct cost dollar.
($2,600+ $9,375+ $7,800+ $10,500) $30,275

Allocated overhead for Trophies = (2600 + 7800) X 1.121718 = $11666.

Allocated overhead for Trophies = (9375 + 10500) X 1.121718 = $22294.

1|Page
 Trophies Plaques Total
Direct materials $15,600 $20,625 $ 36,225
Direct labor 23,400 19,500 42,900
Total direct cost 39,000 40,125 79,125
Allocated overhead
Forming Dept. 14,196 8,190 22,386
Assembly Dept. 11,666 22,294 33,960
Total costs $64,862 $70,609 $135,471

3-
Forming Department:
$12,000
Budgeted setup rate = = $76.92308 per batch.
156 𝑏𝑎𝑡𝑐ℎ𝑒𝑠

$10,386
Budgeted supervision rate = = $0.422195 per direct-labor dollar.
$24,600
Assembly Department:
$23,000
Budgeted setup rate = = $157.5342 per batch.
146 𝑏𝑎𝑡𝑐ℎ𝑒𝑠

$10,960
Budgeted supervision rate = = $0.598907 per direct-labor dollar.
$18,300
Trophies Plaques Total

Direct material costs $15,600 $20,625 $36,225

Direct labor costs 23,400 19,500 42,900
Total direct costs 39,000 40,125 79,125
Forming Dept. overhead
Set up
$76.92308 X 40; 116 3,077 8,923 12,000
Supervision
0.422195 X $15,600; $9,000 6,586 3,800 10,386

Assembly Department overhead

Set up
$157.5342 X 43; 103 6,774 16,226 23,000
Supervision
0.598907 X $7,800; $10,500 4,671 6,289 10,960
Total costs $60,108 $75,363 $135,471

2|Page
Ex 2-7:
1- Simple costing system:
Total indirect costs = $150,000 + $90,000 + $36,000 + $40,000 + $39,000 + $48,000 = $403,000.
Total machine-hours = (400 X 10) + (200 X 10) = 6,000.
Indirect cost rate per machine-hour = $403,000 ÷ 6,000 = $67.17 per machine-hour.
Standard
Simple Costing System Special job
job
Cost of supplies per job $200 $250
Direct manufacturing labor cost per job 180 200
Indirect cost allocated to each job
(10 machine hours  $67.17 per machine hour) 671.70 671.70
Total costs $1,051.70 $1,121.70

2- Activity-based Costing System

Quantity of Cost
Driver Consumed Total Cost
during 2011 Allocation
of Activity Rate
(given)
Standard Special
Activity Cost Driver Job Job
(1) (2) (3) (4) (5) (6) = (5)  ((3) + (4)), or given
Machine operations machine hours 4,000 2,000 $150,000 $ 25.00 per machine hour
(400 jobs  10 mach. hrs.
per job; 200 jobs  10
mach. hrs. per job)
Setups (4  400; 7  200) setup hours 1,600 1,400 $ 90,000 $ 30.00 per setup hour
Purchase orders (given) no. of purchase orders 400 500 $ 36,000 $40.00 per purchase order
Design $ 40,000
Marketing selling price $ 39,000 $0.05 per dollar of sales
Administration dir. labor costs per dollar of direct
$72,000 $40,000 $ 48,000 $0.42857
($180  400; $200  200) manuf. labor cost

Standard Special
Job Job
Cost of supplies ($200  400; $250  200) $ 80,000 $ 50,000
Direct manuf. labor costs ($180  400; $200  200) 72,000 40,000
Indirect costs allocated:
Machine operations ($25 per mach. hr.  4,000; 2,000) 100,000 50,000
Setups ($30 per setup hr.  1,600; 1,400) 48,000 42,000
Purchase orders ($40 per order  400; 500) 16,000 20,000
Design 8,000 32,000
Marketing (0.05  $1,200  400; 0.05  $1,500  200) 24,000 15,000
Administration (0.42857  $72,000; $40,000) 30,857 17,143
Total costs $378,857 $ 266,143
Cost of each job ($378,857  400; $266,143  200) $ 947.14 $1,330.72

3|Page
3-
Cost per job Standard Job Special Job
Simple Costing System $1,051.70 $1,121.70
Activity-based Costing System $ 947.14 $1,330.72
Difference (Simple – ABC) $ 104.56 $ (209.02)

---------------------------------------------------------------------------
Ex 2-8:
1- Simple costing system:
Total indirect costs = $95,000 + $45,000 + $25,000 + $60,000 + $8,000 + 3%[($125 X 3,200) +($200 X 1,800)]
= $255,800.
Total machine-hours = 5,500 + 4,500 = 10,000.
Indirect cost rate per machine-hour = $255,800 ÷ 10,000 = $25.58 per machine-hour.

Simple Costing System Interior Exterior

Direct materialsa $ 96,000 $ 81,000
Direct manufacturing laborb 76,800 64,800
Indirect cost allocated to each job
($25.58 × 5,500; 4,500 machine hours) 140,690 115,110

Total costs $313,490 $260,910

Total cost per unit

($313,490  3,200; $260,910  1,800) $ 97.97 $ 144.95
a
$30 × 3,200 units; $45  1,800 units
b
$16 × 1.5 × 3,200 units; $16 × 2.25 × 1,800 units

2. Activity-based Costing System

Total Cost of Cost Driver

Activity Activity Cost Driver Quantity Allocation Rate
(1) (2) (3) (4) (5) = (2)  (4)

Product scheduling $ 95,000 production runs 125c $ 760.00 per production run
Material handling $ 45,000 material moves 240d $ 187.50 per material move
Machine setup $ 25,000 machine setups 200e $ 125.00 per setup
Assembly $ 60,000 machine hours 10,000 $ 6.00 per machine hour
Inspection $ 8,000 inspections 400f $ 20.00 per inspection
Marketing selling price $ 0.03 per dollar of sales
c d e f
40 + 85 = 125; 72 + 168 = 240; 45 + 155 = 200; 250 + 150 = 400

4|Page
 ABC System Interior Exterior
Direct materials $ 96,000 $ 81,000
Direct manufacturing labor 76,800 64,800
Indirect costs allocated:
Product scheduling ($760 per run  40; 85) 30,400 64,600
Material handling ($187.50 per move  72; 168) 13,500 31,500
Machine setup ($125 per setup  45; 155) 5,625 19,375
Assembly ($6 per MH × 5,500; 4,500) 33,000 27,000
Inspection ($20 per inspection × 250; 150) 5,000 3,000
Marketing (0.03  $125  3,200; 0.03  $200  1,800) 12,000 10,800
Total costs $272,325 $302,075

Total cost per unit

($272,325 ÷ 3,200 units; $302,075 ÷ 1,800 units) $ 85.10 $ 167.82
3-
Cost per unit Interior Exterior
Simple Costing System $97.97 $144.95
Activity-based Costing System $85.10 $167.82
Difference (Simple – ABC) $12.87 $(22.87)

--------------------------------------------------------------------------------
Ex 2-9:
1- The simple costing system reports the following:
Milk
Baked Frozen
Fruit Total
goods products
Juice
Revenues $57,000 $63,000 $52,000 $172,000
Costs
Cost of goods sold 38,000 47,000 35,000 120,000
Store support (30% of COGS) 11,400 14,100 10,500 36,000
Total costs 49,400 61,100 45,500 156,000
Operating income $ 7,600 $ 1,900 $ 6,500 $ 16,000
Operating income ÷ Revenues 13.33% 3.02% 12.50% 9.30%
2- The ABC system reports the following:
Milk
Baked Frozen
Fruit Total
goods products
Juice
Revenues $57,000 $63,000 $52,000 $172,000
Costs
Cost of goods sold 38,000 47,000 35,000 120,000
Ordering ($100 × 30; 25; 13) 3,000 2,500 1,300 6,800
Delivery ($80 × 98; 36; 28) 7,840 2,880 2,240 12,960
Shelf-stocking ($20 × 183; 166; 24) 3,660 3,320 480 7,460
Customer support
($0.20 × 15,500; 20,500; 7,900) 3,100 4,100 1,580 8,780

Total costs 55,600 59,800 40,600 156,000

Operating income $ 1,400 $ 3,200 $11,400 $ 16,000
Operating income ÷ Revenues 2.46% 5.08% 21.92% 9.30%
5|Page
These activity costs are based on the following:
Milk
Baked Frozen
Activity Cost Allocation Rate Fruit
goods products
Juice
Ordering $100 per purchase order 30 25 13
Delivery $80 per delivery 98 36 28
Shelf-stocking $20 per hour 183 166 24
Customer $0.20 per item sold 15,500 20,500 7,900
support

Ex 2-10:
1-
Overhead allocation rate = $453,600 ÷ 10,500 machine-hours = $43.20 per machine-hour.
Job 215 Job 325

Overhead allocateda $1,728 $2,592

a
$43.20 per machine-hour × 40 hours; 60 hours
2- Overhead allocation using an activity-based job-costing system:
Budgeted Budgeted
Overhead Activity Driver Activity Driver Activity Rate
(1) (2) (3) (4) = (1)  (3)
Purchasing $ 70,000 Purchase orders 2,000 $35.00
processed
Material handling $ 87,500 Material moves 5,000 $17.50
Machine maintenance $ 237,300 Machine hours 10,500 $22.60
Product inspection $ 18,900 Inspections 1,200 $15.75
Packaging $ 39,900 Units produced 3,800 $10.50
$ 453,600

Job 215 Job 325

Overhead allocated
Purchasing ($35  25; 8 orders) $ 875.00 $ 280.00
Material handling ($17.50  10; 4 moves) 175.00 70.00
Machine maintenance ($22.60  40; 60 hours) 904.00 1,356.00
Product inspection ($15.75  9; 3 inspections) 141.75 47.25
Packaging ($10.50  15; 6 units) 157.50 63.00
Total $2,253.25 $1,816.25
------------------------------------------------------------------------------

P 2-11:
2. Widnes St. Helen’s
Coal Glass Total
Direct professional labor,
$70 × 104; $70 × 96 $ 7,280 $ 6,720 $14,000
Indirect costs allocated,
$105 × 104; $105 × 96 10,920 10,080 21,000
Total costs to be billed $18,200 $16,800 $35,000

6|Page
P 2-12:
1- Plant-wide costing rate

Fighters Cargo Total

Direct materials
Assembly $2.50 $3.75 $6.25
Painting 0.50 1.00 1.50
Total $3.00 $4.75 $7.75
Direct Labor
Assembly $3.50 $2.00 $5.50
Painting 2.25 1.50 3.75
Total $5.75 $3.50 $9.25

Fighters Cargo Total

Direct materials
($3.00 × 800 units; $4.75 × 740 units) $2,400 $3,515 $ 5,915
Direct manufacturing labor
($5.75 × 800 units; $3.50 × 740 units) 4,600 2,590 7,190
Total direct costs $7,000 $6,105 $13,105

Plant- wide overhead rate = $11,180 ÷ $13,105 = $0.85311 per direct cost dollar.
Fighters Cargo
Total direct costs $ 7,000.00 $ 6,105.00
Overhead allocated (0.85311 × $7,000; $6,105) 5,971.77 5,208.24
Total costs $12,971.77 $11,313.24
Divided by number of units  800  740
Total cost per unit $ 16.21 $ 15.29

2-
𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝐴𝑠𝑠𝑒𝑚𝑏𝑙𝑦 𝐷𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡 𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑐𝑜𝑠𝑡𝑠
Budgeted overhead rate Assembly Dept =
𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝐴𝑠𝑠𝑒𝑚𝑏𝑙𝑦 𝐷𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡 𝑑𝑖𝑟𝑒𝑐𝑡 𝑚𝑎𝑛𝑢𝑓𝑎𝑐𝑡𝑢𝑟𝑖𝑛𝑔 𝑙𝑎𝑏𝑜𝑟 𝑐𝑜𝑠𝑡𝑠

$7,030
= = $1.64252 per direct manuf. labor dollar
($3.50 𝑥 800 𝑢𝑛𝑖𝑡𝑠) +($2 𝑥 740 𝑢𝑛𝑖𝑡𝑠)

𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝑃𝑎𝑖𝑛𝑡𝑖𝑛𝑔 𝐷𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡 𝑜𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝑐𝑜𝑠𝑡𝑠

Budgeted overhead rate Painting Dept =
𝐵𝑢𝑑𝑔𝑒𝑡𝑒𝑑 𝑃𝑎𝑖𝑛𝑡𝑖𝑛𝑔 𝐷𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡 𝑑𝑖𝑟𝑒𝑐𝑡 𝑐𝑜𝑠𝑡𝑠
$4,150
= = $1.02469 per direct cost dollar
($2.75 𝑥 800 𝑢𝑛𝑖𝑡𝑠) +($2.5 𝑥 740 𝑢𝑛𝑖𝑡𝑠)

7|Page
 Fighters Cargo Total
Direct materials $ 2,400 $ 3,515 $ 5,915
Direct manufacturing labor 4,600 2,590 7,190
Total direct costs 7,000 6,105 13,105
Allocated overhead:
Assembly Department
(1.64252  $2,800a; $1,480a) 4,599 2,431 7,030
Painting Department
(1.02469  $2,200b; $1,850b) 2,254 1,896 4,150
Total costs $13,853 $10,432 $24,285
Divided by number of units  800  740
$ 17.32 $ 14.10
aDirect manufacturing labor costs in Assembly Department calculated previously:
Fighters, $3.50 × 800 units = $2,800; Cargo, $2 × 740 units = $1,480
bDirect costs of Painting Department calculated previously:

Fighters, $2.75 × 800 units = $2,200; Cargo, $2.50 × 740 units = $1,850

3- Activity-based Costing

Assembly Department:
$1,700
Budgeted materials handling rate = = $8.58586 per batch.
198 𝑏𝑎𝑡𝑐ℎ𝑒𝑠

$2,750
Budgeted quality inspection rate = = $13.88889 per batch.
198 𝑏𝑎𝑡𝑐ℎ𝑒𝑠

$2,580
Budgeted utilities rate = = $0.602804 per direct labor dollar.
$4,280 [($3.50 𝑥 800 𝑢𝑛𝑖𝑡𝑠) +($2 𝑥 740 𝑢𝑛𝑖𝑡𝑠)]

Painting Department:
$900
Budgeted materials handling rate = = $6.81818 per batch.
132 𝑏𝑎𝑡𝑐ℎ𝑒𝑠

$1,150
Budgeted quality inspection rate = = $8.71212 per batch.
132 𝑏𝑎𝑡𝑐ℎ𝑒𝑠

$2,100
Budgeted utilities rate = = $0.72165 per direct labor dollar.
$2,910 [($2.25 𝑥 800 𝑢𝑛𝑖𝑡𝑠) +($1.50 𝑥 740 𝑢𝑛𝑖𝑡𝑠)]

8|Page
 Fighters Cargo Total
Direct materials $ 2,400 $3,515 $ 5,915
Direct manufacturing labor 4,600 2,590 7,190
Total direct costs 7,000 6,105 13,105
Allocated Assembly Department Overhead:
Materials handling
($8.58586  150; 48) 1,288 412 1,700
Inspection
($13.88889  150; 48) 2,083 667 2,750
Utilities
(0.602804  $2,800; $1,480) 1,688 892 2,580
Allocated Painting Department Overhead:
Materials handling
($6.81818  100; 32) 682 218 900
Inspection
($8.71212  100; 32) 871 279 1,150
Utilities
(0.72165  $1,800c; $1,110c) 1,299 801 2,100
Total costs $14,911 $9,374 $24,285
Divided by number of units  800  740
$ 18.64 $12.67
c
Direct manufacturing labor costs in Painting Department calculated previously:
Fighters, $2.25 × 800 units = $1,800; Cargo, $1.50 × 740 units = $1,110
----------------------------------------------------------------------------

P 2-13:
1-

Overhead costs = $19,000 + $260,000 + $267,900 + $121,200 = $668,100.

Budgeted overhead rate = $668,100 ÷ $393, 000 = $1.70 per direct labor dollar.
X-rays Ultrasound CT scan MRI Total
Technician labor $ 64,000 $104,000 $119,000 $ 106,000 $ 393,000
Depreciation 136,800 231,000 400,200 792,000 1,560,000
Materials 22,400 16,500 23,900 30,800 93,600
Allocated overhead* 108,800 176,800 202,300 180,200 668,100
Total budgeted costs $332,000 $528,300 $745,400 $1,109,000 $2,714,700
Budgeted number of procedures ÷ 2,555 ÷ 4,760 ÷ 3,290 ÷2,695
Budgeted cost per service $ 129.94 $ 110.99 $ 226.57 $ 411.50
* Allocated overhead = Budgeted overhead rate × Technician labor costs
= $1.70 × Technician labor costs

9|Page
2- Budgeted Information

X-rays Ultrasound CT scan MRI Total

Number of procedures 2,555 4,760 3,290 2,695 13,300
Cleaning minutes per procedure ×10 10 ×20 ×40
Total cleaning minutes 25,550 47,600 65,800 107,800 246,750

Number of procedures 2,555 4,760 3,290 2,695 13,300

Minutes for each procedure ×5 ×20 ×15 ×40
Total procedure minutes 12,775 95,200 49,350 107,800 265,125

Units of
Budgeted Cost Cost Driver Cost Driver Activity Rate
Activity (1) (2) (3) (4) = (1) ÷ (3)
Total number
Administration $ 19,000 13,300 $1.42857 per procedure
of procedures
Total dollars
Maintenance $260,000 $1,560,000 $0.166667 per dollar of depreciation
of depreciation
Total cleaning
Sanitation $267,900 246,750 $1.08571 per cleaning minute
minutes
Total procedure
Utilities $121,200 265,125 $0.45714 per procedure minute
minutes

X-rays Ultrasound CT Scan MRI Total

Technician labor $ 64,000 $104,000 $119,000 $ 106,000 $ 393,000
Depreciation 136,800 231,000 400,200 792,000 1,560,000
Materials 22,400 16,500 23,900 30,800 93,600
Allocated activity costs:
Administration
($1.42857 × 2,555; 4,760; 3,290; 3,650 6,800 4,700 3,850 19,000
2,695)
Maintenance
$0.166667 × $136,800; $231,000;
$400, 200; $792,000) 22,800 38,500 66,700 132,000 260,000
Sanitation
($1.08571 × 25,550; 47,600;
65,800; 27,740 51,680 71,440 117,040 267,900
107,800)
Utilities
($0.45714 × 12,775; 95,200; 5,840 43,520 22,560 49,280 121,200
49,350;
107,800)
Total budgeted cost $283,230 $492,000 $708,500 $1,230,970 $2,714,700
Budgeted number of procedures ÷ 2,555 ÷ 4,760 ÷ 3,290 ÷ 2,695
Budgeted cost per service $ 110.85 $ 103.36 $ 215.35 $ 456.76

10 | P a g e
P 2-14:
1-
Direct costs = Dance teacher salaries, Child care teacher salaries, Fitness instructor salaries.

Indirect costs = Supplies; Rent, maintenance, and utilities; Administration salaries; Marketing expenses

2-

Indirect Cost Cost Driver Budgeted Cost Driver Rate

Supplies Number of participants $21,984 ÷ 2,205 = $9.97 per participant
Rent, maintenance, and utilities Square footage $97,511÷ 11,650 = $8.37 per square foot
Administration salaries Number of participants $50,075 ÷ 2,205 = $22.71 per participant
Marketing expenses Number of advertisements $21,000 ÷ 70 = $300 per advertisement

Supplies – Larger programs with more participants will require more supplies. For example,
asthe number of dance participants increases, so will the cost of dance accessories.

Rent, maintenance and utilities are all building-related costs. Square-footage is the only
space-oriented cost driver available.

Administration salaries – Larger programs require more time to enroll students and collect
fees.Consequently, the number of participants appears to be a reasonable cost driver.

Marketing expenses – Marketing expenses include the cost of advertising the studio. As thenumber of ads
increases so do total marketing costs.

3-

Dance Childcare Fitness Total

Salaries $ 62,100 $ 24,300 $ 39,060 $ 125,460
Allocated costs:
Supplies
($9.97×1,485; 450; 270) 14,805 4,487 2,692 21,984
Rent, maintenance, and utilities
($8.37×6,000; 3,150; 2,500) 50,220 26,366 20,925 97,511
Administration salaries
($22.71×1,485; 450; 270) 33,724 10,219 6,132 50,075
Marketing expenses
($300×26; 24; 20) 7,800 7,200 6,000 21,000
Budgeted total costs $ 168,649 $ 72,572 $ 74,809 $ 316,030
÷ Number of participants ÷ 1,485 ÷450 ÷270
Budgeted cost per participant $ 113.57 $ 161.27 $ 277.07

11 | P a g e
P 2-15:
1-
General Mom-and-Pop
Supermarket Drugstore Single
Chains Chains Stores Total
Revenues $3,708,000 $3,150,000 $1,980,000 $8,838,000
Cost of goods sold 3,600,000 3,000,000 1,800,000 8,400,000
Gross margin $ 108,000 $ 150,000 $ 180,000 $ 438,000
Other operating costs 301,080
Operating income $ 136,920

Gross margin % 2.91% 4.76% 9.09%

The gross margin of Pharmacare, Inc., was 4.96% ($438,000 ÷ $8,838,000). Theoperating income margin of
Pharmacare, Inc., was 1.55% ($136,920 ÷ $8,838,000)---------‫الجزء دا مش مطلوب في المسالة‬

2-
The per-unit cost driver rates are:

1. Customer purchase order processing,

$80,000 ÷ 2,000 (140 + 360 + 1,500) orders = $40 per order
2. Line item ordering,
$63,840 ÷ 21,280 (1,960 + 4,320 + 15,000) line items = $ 3 per line item
3. Store delivery,
$71,000 ÷ 1,480 (120 + 360 + 1,000) deliveries = $47.973 per delivery
4. Cartons shipped,
$76,000 ÷ 76,000 (36,000 + 24,000 + 16,000) cartons = $ 1 per carton
5. Shelf-stocking,
$10,240 ÷ 640 (360 + 180 + 100) hours = $16 per hour

3-
General Mom-and-
Supermarket Drugstore Pop
Chains Chains Single Stores Total
1. Customer purchase order processing
($40  140; 360; 1,500) $ 5,600 $14,400 $ 60,000 $ 80,000
2. Line item ordering
($3  1,960; 4,320; 15,000) 5,880 12,960 45,000 63 ,840
3. Store delivery,
($47.973  120; 360; 1,000) 5,757 17,270 47,973 71,000
4. Cartons shipped
($1  36,000; 24,000; 16,000) 36,000 24,000 16,000 76,000
5. Shelf-stocking
($16  360; 180; 100) 5,760 2,880 1,600 10,240
$58,997 $71,510 $170,573 $301,080

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The revised operating income statement is:
General Mom-and-Pop
Supermarket Drugstore Single
Chains Chains Stores Total
Revenues $3,708,000 $3,150,000 $1,980,000 $8,838,000
Cost of goods sold 3,600,000 3,000,000 1,800,000 8,400,000
Gross margin 108,000 150,000 180,000 438,000
Operating costs 58,997 71,510 170,573 301,080
Operating income $ 49,003 $ 78,490 $ 9,427 $ 136,920

Operating income margin 1.32% 2.49% 0.48% 1.55%

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P 2-16:
1-
Direct materials—purses Output unit-level costs
Direct materials—backpacks Output unit-level costs
Direct manufacturing labor—purses Output unit-level costs
Direct manufacturing labor—backpacks Output unit-level costs
Setup Batch-level costs
Shipping Batch-level costs
Design Product-sustaining costs
Plant utilities and administration Facility-sustaining costs

2-

Direct materials—purses Number of purses

Direct materials—backpacks Number of backpacks
Direct manufacturing labor—purses Number of purses
Direct manufacturing labor—backpacks Number of backpacks
Setup Number of batches
Shipping Number of batches
Design Number of designs
Plant utilities and administration Hours of production

Direct material and direct manufacturing labor are costs that can be easily traced to output, which in this case is
the number of purses or backpacks produced.

Setup and shipping are both a function of the number of batches produced. Design is related to the number of
designs created for each product.

Plant utilities and administration result from general activity level in the plant. Thus, hours of production seem
to be an appropriate cost driver.

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3-
Direct materials—purses $379,290 ÷ 3,350 purses = $113.22 per purse
Direct materials—backpacks $412,920 ÷ 6,050 backpacks = $68.25 per backpack
Direct manufacturing labor—purses $98,000 ÷ 3,350 purses = $29.25 per purse
Direct manufacturing labor—backpacks $120,000 ÷ 6,050 backpacks = $19.83 per backpack
Setup $65,930  190 batches = $347 per batch
Shipping $73,910  190 batches = $389 per batch
Design $166,000 ÷ 4 designs = $41,500 per design
Plant utilities and administration $243,000 ÷ 4,050 hours = $60 per hour

4-

Backpacks Purses Total

Direct materials $412,920 $379,290 $ 792,210
Direct manufacturing labor 120,000 98,000 218,000
Setup
($347 × 130; 60 batches) 45,110 20,820 65,930
Shipping
($389 × 130; 60 batches) 50,570 23,340 73,910
Design
($41,500 × 2; 2 designs) 83,000 83,000 166,000
Plant utilities and administration
($60 × 1,450; 2,600 hours) 87,000 156,000 243,000
Budgeted total costs $798,600 $760,450 $1,559,050
Divided by number of backpacks/purses ÷ 6,050 ÷ 3,350
Budgeted cost per backpack/purse $ 132.00 $ 227.00
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P 2-17:
1-a

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These cost drivers are chosen as the ones that best match the descriptions of why the costs arise. Other answers
are acceptable, provided that clear explanations are given.

1-b
program follow:

Drug After-Care Total

Direct labor
Physicians at $150,000 × 4; 0 $ 600,000 ––– $ 600,000
Psychologists at $75,000 × 4; 8 300,000 $ 600,000 900,000
Nurses at $30,000 × 6; 10 180,000 300,000 480,000
Direct labor costs 1,080,000 900,000 1,980,000
Medical supplies1 $2,000 × 50; 60 100,000 120,000 220,000
Rent and clinic maintenance2
$6 × 9,000; 12,000 54,000 72,000 126,000
Administrative costs to manage
patient charts, food, and laundry3
$4,000 × 50; 60 200,000 240,000 440,000
Laboratory services4
$40 × 1,400; 700 56,000 28,000 84,000
Total costs $1,490,000 $1,360,000 $2,850,000

$1, 490, 000

Cost per patient-year = $29,800
50
1
Allocated using patient-years
2
Allocated using square feet of space
3
Allocated using patient-years
4
Allocated using number of laboratory tests

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