Question

Product-Costing Accuracy, Consumption Ratios, Activity Rates, Activity Costing

Tristar Manufacturing produces two types of battery-operated toy soldiers: infantry and special forces. The soldiers are produced by using one continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have been used to assign costs to each activity. The overhead activities, their costs, and the other related data are as follows:

Product Machine Hours Setups Receiving Orders Packing Orders
Infantry 27,500 300 900 1,600
Special forces 20,000 100 100 1,800
Costs $80,000 $24,000 $22,000 $30,000
Required:

1. Calculate the total overhead assigned to each product by using only machine hours to calculate a plantwide rate. Round your interim rate calculation to two decimal places, if required.

Infantry $
Special forces $
2. Calculate consumption ratios for each activity. Round your answers to two decimal places.

Product Machine Hours Setups Receiving Orders Packing Orders
Infantry
Special forces
3. Calculate a rate for each activity by using the associated driver. If required, round your answers to two decimal places.

Machining $ per machine hour
Setups $ per setup
Receiving $ per receiving order
Packing $ per packing order
4. Assign the overhead costs to each product by using the activity rates computed in Requirement 3.

Infantry Special Forces
Machining $ $
Setups
Receiving
Packing
Total $ $

Answer 1

Answer:

Tristar Manufacturing

1.                         Total                 Infantry              Special forces      

Machining,     80,000            46,315.79              33684.21

Setups,           24,000            13894.74               10,105.26

Receiving,       22,000           12736.84               9263.16

Packing          30,000             17368.42               12631.58

Working:

(27,500/47,500)* 80,000=46,315.79

(20,000/47,500)* 80,000=33684.21

The same rates are used for all costs 27,500/47,500= 0.5789 for Infantry

and 20,000/47,500= 0.4210 for  Special forces

2. Consumption Ratios

                               Infantry         Special forces       Total

Machine Hours,        0.5789          0.4210               47,500

Setups,                      0.75                   0.25                   400

Receiving Orders,     0.9               0.1                           1000

Packing Orders        0.47              0.53                  3400

3. Rate for Each activity

Machining $80,000/ 47,500= $1.68per machine hour

Setups $24000/ 400 setup =   $  60 per setup

Receiving $22,000/ 1000 receiving order =  Receiving $ 22 per receiving order

Packing $30,000/3400 packing order= Packing $8.82  per packing order

4.                      Total                 Infantry              Special forces      

Machining,     80,000               46200                 33800

Setups,           24,000             18000                    6000

Receiving,       22,000             19800                    2200

Packing          30,000              14112                       15888

Working

                                  Infantry         Special forces      

Machine Hours,        27,500 * 1.68         20,000*1.68                

Setups,                      300*60                    100*60                  

Receiving Orders,     900* 22                  100*22                  

Packing Orders        1600 *8.82              1,800* 8.82