# Week 7 - Accumulating and Assigning Costs to Products

 The flashcards below were created by user honestkyle on FreezingBlue Flashcards. In question 4-24, regarding the manufacturing overhead cost per year (\$4 mil) and the machine hour choices including practical capacity (120,000) and projected near-term usage (80,000), what is likely to happen if demand decreases further and the company continues to recompute its cost-driver rate using the same approach? Prices will increase due to its cost-plus pricing strategy which will further decrease demand and send them into a death spiral. In question 4-24, how should the company choose its cost driver rate in order to avoid a death spiral? They should use the practical capacity so it will more evenly match the cost of resources provided. The company can also calculate the unused capacity and determine other profitable areas to use these remaining resources. In question 4-30, how is the cost-driver rate computed for the Machining Department? Budgeted overhead cost / Machine hours\$350,000 / 14,000 machine hours = \$25.00 /MH In question 4-30, how is the cost-driver rate computed for the Finishing Department? Budgeted overhead / Direct labor cost\$280,000 / \$350,000 = \$0.80 / DL\$ In question 4-30, when computing the total cost charged to Job #101, how are the Applied overhead costs calculated? For the Machining Department, multiply the machine hours (cost driver) for the job by the cost-driver rate.50 hours x \$25.00/MH = \$1,250For the Finishing Department, multiply the direct labor cost by the cost-driver rate.\$800 x \$0.80/DL\$ = \$640. In question 4-31, how is the plantwide cost-driver rate computed? Plantwide overhead costs / plantwide direct labor hours\$60,000 / 4000 DLH= \$15.00/DLH In question 4-31, what are the reasons for choosing only one cost-driver rate, or two cost-driver rates? Using only one rate is simpler - less costly to implement and audit.Two cost-driver rates is potentially more accurate. In question 4-32, how are the Monthly Support Cost Rates calculated using actual machine hours and overhead costs? Monthly overhead costs / Monthly actual machine hours\$70,000 / 1,350 = \$51.85\$70,000 / 1,400 = \$50.00 In question 4-32, what can the company do instead of calculate monthly overhead costs per machine hour? They can calculate the support cost-driver rate based on annual data.(\$70,000 x 12 months) ÷ (1500 MH x 12 months) = \$46.67/MHIf there are multiple cost drivers that contribute to the manufacturing overhead, they may want to use multiple cost-driver rates and/or non-volume-related cost drivers. Authorhonestkyle ID287924 Card SetWeek 7 - Accumulating and Assigning Costs to Products DescriptionAccumulating and Assigning Costs to Products Updated2014-11-03T03:13:32Z Show Answers