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ABC, variable, overhead cost allocations

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1. Information for Gifford, Inc., as of December 31 follow:
Administrative salaries-----------------------$35,000
Dpreciation of factory equipment------------25,000
Depreciation of delivery vehicles--------------6,000
Direct labor----------------------------------------68,000
Factory supplied used-----------------------------9,000
Finished goods inventory, January 1----------57,000
Finished goods inventory, Dcember 31--- ?
Factory insurance -------------------------------- 15,500
Interest Expense-----------------------------------12,000
Factory utilities-------------------------------------14,000
Factory maintenance--------------------------------7,500
Raw materials inventory, January 1------------5,000
Raw materials inventory, December 31--------4,000
Raw material purchase -------------------------125,000
Rent on factory building--------------------------25,000
Repairs offactory equipment--------------------11,500
Sales comissions-----------------------------------37,500
Goods in process inventory, January 1----------3,500
Goods in process inventory, December 31-----2,700
Prepare a manufacturing statement for the year ended December 31.

2. The following cost items relate to the Brock Company. Classify each cost as a variable cost, a
fixed cost, or a mixed cost placing an X in the appropirate clumn. Each cost should be evaluated in
terms fo the volume of unites of finished products produced. Also indicate with an X for each item
if it is a product cost or a period cost.

Variable, fixed, or mixed cost?
Cost item Variable. Fixed Mixed
Executive slarary
Direct labors
Direct materials
Depreciation of manufacturing equipment
Indirect labor
Factory utilities
Delivery expense
Television advertising
Indirect materials

10. Outdoor Sports, Inc., produces two types of skis, downhill skis and cross country skis.
Product and production information about the two items is shown below:

Downhill skis Cross country skis
Number os sets sold....... 75,000 125,000
Number of setups........... 200 50
Total direct labor hours... 150,000 hours 250,000 hours
Direct labor hours per unit.. 2 hours 2 hours
Total machine hours---------- 25,000 hours 100,000 hours
Machine hours per unit------ 0,333 hours 0,08 hours

Indirect costs consist of the following
Depreciation of factory equipement... $2,000,000
Setup costs........................................ 1,500,000
Miscellaneous indirect costs.............. 1,000,000
Total.................................................. $4,500,000

1. If Outdoor Sports uses the traditional two-stage method of allocating overhead costs based on
direct labor hours, what is the amount of indirect costs per set of skis each of the two types of

2. If Outdoor Sports uses activity based costing, what is the total amount of indirect costs per set of
skis for each of the two types of skis? Assume that depreciation is allocated based on
machien hours, setup costs based on the number of setups, and miscellaneous costs based on the
number of direct labor hours.

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Solution Summary

ABC, variable and overhead cost allocation is examined for an Outdoor Sports store.

See Also This Related BrainMass Solution

Job costing for toy trucks; overhead allocation; ABC for Honey Lake Summer Camp

Please see the attached file.

1) The job cost sheet for 1,000 units of toy trucks is:

Job Number 555 Date Started 4/13
Date Completed 6/18

Raw Materials Direct Labor
Date Type Cost Qty. Amount Cost Hours Amount
4/13 565 $ 3 1,000 $3,000 $18 20 $ 360
5/24 889 1 4,000 4,000 12 10 120
6/18 248 2 1,000 2,000 15 100 1,500
$9,000 130 $1,980

Total direct materials $9,000
Total direct labor 1,980
Overhead (130 direct labor hours @ $10/hour) 1,300
Total Job Cost $12,280

All of the materials for the job were purchased on 4/10. The batch of 1,000 toy trucks is sold on 7/10.

a) What are the costs of this job order in the raw materials account, on 4/30, 5/31, 6/30 and 7/31?

a. $5,000, $3,000, $0, and $0
b. $4,000, $2,000, $0 and $0
c. $6,000, $2,000, $0 and $0
d. $6,000, $3000, $1,000, and $1,000

b) what are the costs of this job order in the work-in-process account, on 4/30, 5/31, 6/30 and 7/31?

a. $3,560, $7,780, $0, and $0
b. $4,580, $6,780, $0 and $0
c. $3,560, $6,780, $0 and $0
d. $2, 560, $7,780, $0 and $0

2) The Alphonse Company allocates fixed overhead costs by machine hours and variable overhead costs by direct labor hours. At the beginning of the year the company expects fixed overhead costs to be $600,000 and variable costs to be $800,000. The expected machine hours are 6,000 and the expected direct labor hours are 80,000. The actual fixed overhead costs are $700,000 and the actual variable overhead costs are $750,000. The actual machine hours during the year are 5,500 and the actual direct labor hours are 90,000.

a) How much overhead is allocated?

a. $1,500,000
b. $1,450,000
c. $1,400,000
d. $1,350,000

b) what is the over/underabsorbed overhead?

a. $2,000
b. $0
c. $5,000
d. $1,000

3). For many years the Honey Lake Summer Camp had used the number of campers per week to estimate weekly costs. The summer camp is open for ten weeks during the summer with a different number of campers each week. July is busiest with June and the end of August least busy. Costs from the last week of summer camp in 1998 are used to estimate costs for 1999 for pricing purposes. The following costs occurred during the last week of 1998 and the costs of each cost category are expected to be the same for 1999:

Weekly Cost
Supervisor's salary $ 400
Cook's salary 300
Camp counselor salaries (1 for each occupied cabin, each of
which hold 10 campers) (5 counselors × $200/counselor) 1,000
Food (50 campers × $100/camper) 5,000
Supplies (50 campers × $20/camper) 1,000
Utilities (50 campers × $10/camper) 500
Insurance (50 campers × $20/camper) 1,000
Property tax ($10,000/10 weeks) 1,000
Weekly total $10,200

Cost per camper: $10,200/50 campers = $204/camper

The Honey Lake Summer Camp expects 75 campers during the second week of July.

a) what is the expected cost of that week using the average cost?

a. $15,300
b. $16,000
c. $14,500
d. $16,300

b) what is the expected cost of that week using ABC?

a. $16,550
b. $14,550
c. $15,600
d. $16,800

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