Cost Accounting for Product Grades
Not what you're looking for?
Exhibit 1
Selected product grades with production and financial data
Product (Grade) Caliper Coated/Uncoated Slit Average Reels per Batch Material Cost per Reel Selling Price per Reel
A 0.013 Coated Yes 50 $4,800 $12,600
B 0.014 Uncoated No 2 $5,200 $13,500
C 0.015 Coated Yes 35 $5,600 $14,200
D 0.02 Coated No 175 $7,400 $19,500
Exhibit 2
Overhead Structure
Total Grade Change Slitting Net
Depreciation $800,000 $8,000 $70,000 $722,000
Labor $300,000 $3,000 $25,000 $272,000
Energy $500,000 $5,000 $80,000 $415,000
Other $198,470 $1,000 $20,000 $177,470
Unrecoverable Clay and Chemicals from Grade Changeovers $30,000 $30,000 $0 $0
Total $1,828,470 $47,000 $195,000 $1,586,470
Calculate the volume-based (traditional) cost per reel for grades A-D identified in Exhibit 1.
What is the cost for Forest Hill to conduct a grade change?
What is the cost for Forest Hill to slit a reel of paperboard? As shown in Exhibit 1, only products A and C are routinely slit. For purposes of your analysis, assume the slitting equipment must be set up and adjusted between each reel slit.
Calculate the new volume-based overhead rate after removing grade change and slitting costs.
Determine the activity-based costs for grades A-D
Prepare a table that illustrates the percentage change in costs between the volume-based system and the strategic activity-based system.
Purchase this Solution
Solution Summary
The solution examines cost accounting for product grades. The volume-based cost per reel for grades is calculated.
Purchase this Solution
Free BrainMass Quizzes
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Basics of corporate finance
These questions will test you on your knowledge of finance.
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.