Business
Business, 19.02.2020 22:01, paulesparsa6

Test Laboratories does heat testing (HT) and stress testing (ST) on materials and operates at capacity. Under its current simple costing system, Ayer aggregates all operating costs of $1,330,000 into a single overhead cost pool. Ayer calculates a rate per test-hour of $14 ($1,330,000 / 95,000 total test-hours). HT uses 55,000 test-hours, and ST uses 40,000 test-hours. Gary Daley, Ayer's controller, believes that there is enough variation in test procedures and cost structures to establish separate costing and billing rates for HT and ST. The market for test services is becoming competitive. Without this information, any miscosting and mispricing of its services could cause Ayer to lose business. Daley divides Ayer's costs into four activity-cost categories.

a. Direct-labor costs, $222,000. These costs can be directly traced to HT, $155,000, and ST, $ 67,000.

b. Equipment-related costs (rent, maintenance, energy, and so on), $ $475,000. These costs are allocated to HT and ST on the basis of test-hours.

c. Setup costs, $385,000. These costs are allocated to HT and ST on the basis of the number of setup-hours required. HT requires 13,000 setup-hours, and ST requires 4,500 setup-hours.

d. Costs of designing tests, $248,000. These costs are allocated to HT and ST on the basis of the time required to design the tests. HT requires 3,000 hours, and ST requires 1,000 hours.

REQUIREMENTS:

1. Classify each activity cost as output unit-level, batch-level, product- or service-sustaining, or facility-sustaining. Explain each answer.

2. Calculate the cost per test-hour for HT and ST using ABC. Explain briefly the reasons why these numbers differ from the $14 per test-hour that Ayer calculated using its simple costing system.

3. Explain the accuracy of the product costs calculated using the simple costing system and the ABC system. How might Ayer management use the cost hierarchy and ABC information to better manage its business?

answer
Answers: 1

Other questions on the subject: Business

image
Business, 21.06.2019 22:40, Maddy1212
The vaska company buys a patent on january 1, year one, and agrees to pay $100,000 per year for the next five years. the first payment is made immediately, and the payments are made on each january 1 thereafter. if a reasonable annual interest rate is 8 percent, what is the recorded value of the patent? 1. $378,4252. $431,2133. $468,9504. $500,000
Answers: 3
image
Business, 22.06.2019 05:50, salvadorperez26
Match the steps for conducting an informational interview with the tasks in each step.
Answers: 1
image
Business, 22.06.2019 13:10, princessgabbee8452
Paid-in-capital in excess of par represents the amount of proceeds a. from the original sale of common stock b. in excess of the par value from the original sale of common stock c. at the current market value of the common stock d. at the curent book value of the common stock
Answers: 1
image
Business, 22.06.2019 15:40, brookekolmetz
As sales exceed the break‑even point, a high contribution‑margin percentage (a) increases profits faster than does a low contribution-margin percentage (b) increases profits at the same rate as a low contribution-margin percentage (c) decreases profits at the same rate as a low contribution-margin percentage (d) increases profits slower than does a low contribution-margin percentage
Answers: 1
Do you know the correct answer?
Test Laboratories does heat testing (HT) and stress testing (ST) on materials and operates at capaci...

Questions in other subjects:

Konu
Social Studies, 26.02.2022 03:40