Exam 4: Cost Pools, Capacity, and Activity- Based Costing

A machine, the factory space it occupies, and its operator are all specialized to produce a particular part of a firm's product. These resources may be characterized as a homogeneous cost pool.

Birds in Your Backyard produces a line of premium birdseed. Two of its products, flaxseed and safflower seed, are blended in the same machine center. This machine center operates two 2,000-hour shifts per year. Last year, the center processed 300,000 pounds of flaxseed and 650,000 pounds of safflower seed. The flaxseed has a cycle time of 20 seconds per pound and the safflower seed has a cycle time of 10 seconds per pound. Managed capacity costs last year were $2,000,000 and committed capacity costs were $1,533,000. Required a) Compute the machine center's cost per available hour. b) Compute the total nonproductive cost.

The most critical feature of resources included in a cost pool is:

Depreciation on the machinery in a cost pool cannot be managed by reducing the work done by the machine center.

Vulcan Tool and Die Company has developed a cost pool for a machine center that bores holes into cast iron material. The costs in the pool include depreciation on the boring machine, electricity needed to run the machine, depreciation on the factory space required by the machine center, and the wages of the machine operator. Of these costs, which would be classified as manageable?

If a resource is shared between two cost pools, their use will have to be estimated because they lack:

An assigned indirect cost differs from an allocated indirect cost in that:

The 195 Factory produces replacement parts and assemblies for vintage Cessna aircraft. The company's current costing system traces direct material and direct labor costs into individual jobs and assigns overhead costs to jobs using a predetermined overhead rate based on direct labor hours required by the job. All direct labor is paid at the same rate of $30 per hour. - This year's overhead rate is based on estimated total overhead on $2,000,000 and 10,000 direct labor hours. Two jobs are currently complete and ready for delivery to the customer. One is a wing assembly that required raw material costing $5,000 and consumed 40 hours of direct labor time. The other is a wheel strut that required raw materials of $2,000 and consumed 20 hours of direct labor time. Under the current cost system, what amount of overhead will be charged to the wing assembly job?