Wednesday

December 17, 2014

December 17, 2014

Posted by **Veronica** on Sunday, July 15, 2012 at 3:29pm.

Buttercream Macaroon Sugar

Projected sales in units 500,000 800,000 600,000

PER UNIT data:

Selling price $0.80 $0.75 $0.60

Direct materials $0.20 $0.15 $0.14

Direct labor $0.04 $0.02 $0.02

Hours per 1,000-unit batch:

Direct labor hours 2 1 1

Oven hours 1 1 1

Packaging hours 0.5 0.5 0.5

Total overhead costs and activity levels for the year are estimated as follows:

Activity Overhead costs Activity levels

Direct labor 2,400 hours

Oven $120,000 1,900 hours

Packaging $150,000 950 hours

Total $270,000

Questions:

Determine the activity-cost-driver rate for packaging costs (three points).

Using the ABC system, for the sugar cookie, compute the estimated overhead costs per 1,000 cookies (three points).

Using the ABC system, for the sugar cookie, compute the estimated operating profit per 1,000 cookies (three points).

Using a traditional system (with direct labor hours as the overhead allocation base) for the sugar cookie, compute the estimated overhead costs per 1,000 cookies (three points).

Using a traditional system (with direct labor hours as the overhead allocation base) for the sugar cookie, compute the estimated operating profit per 1,000 cookies (3 points).

Explain the difference between the profits obtained from the traditional system and the ABC system. Which system provides a better estimate of profitability? Why? (three points).

Problem 2: What is activity-based management and how can it be used to improve the profitability of a company? (12 points)

**Answer this Question**

**Related Questions**

algebra - two bakeries produce three types of cookies, chocolate chip, sugar, ...

college math - two bakeries produce three types of cookies, chocolate chip, ...

Math - Monique is making cookies for the pajama party at her house. She has 3-1/...

MATH - three brothers try to divide some cookies. The oldest brother gets half ...

algebra - Tammy bought 16 cookies for a party. She had 6 cookies decorated at an...

Math - Tammy bought 16 cookies for a party. She had 6 6 cookies decorated at an ...

Algebra - A cookie company uses one cup of sugar for every 35 cookies it makes. ...

algebra - A cookie company uses one cup of sugar for every cookies it makes. ...

Math - Mrs. Smith surprised her 30 students with cookies. She gave them a choice...

Probabilities - In a cookie jar, there are 6 chocolate cookies and 8 oatmeal ...