Activity Cost Rates
P 3. Noir Company produces four versions of its model J17-21 bicycle seat. The
four versions have different shapes, but their processing operations and production
costs are identical. During July, these costs were incurred:
Direct materials
Leather $25,430
Metal frame 39,180
Bolts 3,010
Materials handling
Labor 8,232
Equipment depreciation 4,410
Electrical power 2,460
Maintenance 5,184
Assembly
Direct labor 13,230
Engineering design
Labor 4,116
Electrical power 1,176
Engineering overhead 7,644
Overhead
Equipment depreciation 7,056
Indirect labor 30,870
Supervision 17,640
Operating supplies 4,410
Electrical power 10,584
Repairs and maintenance 21,168
Building occupancy overhead 52,920
July’s output totaled 29,400 units. Each unit requires three machine hours of
effort. Materials handling costs are allocated to the products based on direct
materials cost, engineering design costs are allocated based on units produced,
and overhead is allocated based on machine hours. Assembly costs are allocated
based on direct labor hours, which are estimated at 882 for July.
During July, Noir Company completed 520 bicycle seats for Job 142. The
activity usage for Job 142 was as follows: direct materials, $1,150; direct labor
hours, 15.
Required
1. Compute the following activity cost rates: (a) materials handling cost rate;
(b) assembly cost rate, (c) engineering design cost rate, and (d) overhead rate.
2. Prepare a bill of activities for Job 142.
3. Use activity-based costing to compute the job’s total cost and product unit cost.
Breakeven Analysis
E 8. Techno Designs produces head covers for golf clubs. The company expects to
generate a profit next year. It anticipates fixed manufacturing costs of $126,500
and fixed general and administrative expenses of $82,030 for the year. Variable
manufacturing and selling costs per set of head covers will be $4.65 and $2.75,
respectively. Each set will sell for $13.40.
1. Compute the breakeven point in sales units.
2. Compute the breakeven point in sales dollars.
3. If the selling price is increased to $14 per unit and fixed general and administrative
expenses are cut by $33,465, what will the new breakeven point be
in units?
4. Prepare a graph to illustrate the breakeven point computed in 2.