Activity-based costing problemFactory A produces golf carts. One of its plants in Texasproduces two...Activity-based...

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Accounting

Activity-based costing problem
Factory A produces golf carts. One of its plants in Texasproduces two versions of carts: a basic model and a deluxe model.The deluxe model has a sturdier frame, a higher horsepower engine,bigger tires, and softer seats. At the beginning of the year, thefollowing data were prepared by the controller’s office for thisTexas plant:
                                                                                       Basic                        Deluxe
Expected Quantity toProduce                        20,000carts                10,000 carts
SellingPrice                                                               $1,800                      $ 3,600
Direct Material Cost                                                  $    500                      $ 1,000
Direct LaborCost                                                       $    300                      $     600
MachineHours                                                             1,000                          3,000
Direct LaborHours                                                    10,000                      10,000
Activity Center (Cost Driver)
Engineering Support(Hours)                                        1,500                          4,500
Receiving (OrdersProcessed)                                          300                             500
Material Handling (Number ofMoves)                        2,000                          4,000
Purchasing (Number ofOrders)                                      100                             200
Maintenance (Machine HoursUsed)                            1,000                          3,000
Paying Suppliers (InvoicesProcessed)                            250                             500
Equipment Setups (Number ofSetups)                              20                               60
Total overhead costs of $6,000,000 associated with activitycenters are reported as:
MaintainingEquipment                                              $ 1,140,000
EngineeringSupport                                                  $ 1,200,000
MaterialHandling                                                      $ 1,200,000
Setting UpEquipment                                                $    960,000
PurchasingMaterials                                                  $    600,000
ReceivingGoods                                                        $    400,000
PayingSuppliers                                                        $    300,000
Providing FacilitySpace                                            $    200,000
Facility-level costs are allocated on basis of machine hoursused . This provides a measure of time the facility is used by eachproduct.
Requirements:
Calculate the cost to produce each type of cart usingdirect labor hours as basis to allocate overheadcosts.
Calculate the cost to produce each type of cart usingactivity-based-costing.
Explain the difference in the costs using the twodifferent accounting systems. Provide appropriate supportingquantitative analysis.

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Calculate the cost to produce each type of cart using direct labor hours as basis to allocate overhead costs Traditional overhead rate Total overhead cost total direct labor hours 6000000 20000 300 per direct labor hour Manufacturing Cost per unit Basic Deluxe Direct material cost 500 1000 Direct labor cost 300 600 Manufacturing OH 150 300 Total Manuf Cost 950 1900 10000 x 30020000 150 10000 x 30010000 300 Calculate the cost to See Answer

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In: AccountingActivity-based costing problemFactory A produces golf carts. One of its plants in Texasproduces two...Activity-based costing problemFactory A produces golf carts. One of its plants in Texasproduces two versions of carts: a basic model and a deluxe model.The deluxe model has a sturdier frame, a higher horsepower engine,bigger tires, and softer seats. At the beginning of the year, thefollowing data were prepared by the controller’s office for thisTexas plant: Basic DeluxeExpected Quantity toProduce 20,000carts 10,000 cartsSellingPrice $1,800 $ 3,600Direct Material Cost $ 500 $ 1,000Direct LaborCost $ 300 $ 600MachineHours 1,000 3,000Direct LaborHours 10,000 10,000Activity Center (Cost Driver)Engineering Support(Hours) 1,500 4,500Receiving (OrdersProcessed) 300 500Material Handling (Number ofMoves) 2,000 4,000Purchasing (Number ofOrders) 100 200Maintenance (Machine HoursUsed) 1,000 3,000Paying Suppliers (InvoicesProcessed) 250 500Equipment Setups (Number ofSetups) 20 60Total overhead costs of $6,000,000 associated with activitycenters are reported as:MaintainingEquipment $ 1,140,000EngineeringSupport $ 1,200,000MaterialHandling $ 1,200,000Setting UpEquipment $ 960,000PurchasingMaterials $ 600,000ReceivingGoods $ 400,000PayingSuppliers $ 300,000Providing FacilitySpace $ 200,000Facility-level costs are allocated on basis of machine hoursused . This provides a measure of time the facility is used by eachproduct.Requirements:Calculate the cost to produce each type of cart usingdirect labor hours as basis to allocate overheadcosts.Calculate the cost to produce each type of cart usingactivity-based-costing.Explain the difference in the costs using the twodifferent accounting systems. Provide appropriate supportingquantitative analysis.