Northwest Company produces two types of glass shelving. It collected data on overhead costs, quantities produced, and average costs per foot for each product. The controller wants to apply activity-based costing to allocate overhead costs and see if average costs per foot would change significantly. Additional information was collected on overhead cost categories, cost drivers for each category, and usage of each driver by the two product lines.

1. 3117t13 A;signment Print View
Es<ercise 17-1 4 Activity-based cosling af overhead L.O. p3
Northwest Company produces two types of glass shelMng,
roundeC edge and squared edge, on the same
production line- For the cunent period, the company reports the
folk:wing data.
1,
orerhend (300% of direct labor cost) 18,600 3tt,700 il,300
Total c;ost
Quantity produced
Ar,eragie cost per ft.
$ 34,1ao $ €,tl,zoo g 1o3,3oo
10,500 ft. 14,1AO ft..
$ 3.25 $ 4.e1
Northwest's controller wishes to apply activty{ased costing
(ABi:)) to allocate the $54,300 of or,erhead
costs incuned by the two product lines to see whether cost per
foot vvould change markedly ftom that
reported abo,e. She has collected the bllowing information.
Overhead Cost Category (Actirity Cost Pool) Cost
Supervision $ 2,172
Depreciation of machinery 29,000
Assembly line preparation 23J29

2. Total orcrhead $ il,300
She has also collected the following information about the cost
dri,ers {or each category (cost pool) and the
amount rf each dri,er used by the two product lines.
Usage
Overherd Cost Category
(Activity,Cost Pool) Drir,er Rounded Edg() Squared Edge Total
Supenision Direct taborcost (g) $ 6,200 $ 11,900 g 18,100
Depreciation ofmachinery Machine hours 300 hounr 700 hours
1,000 hours
Assemlty line preparation Setups (number) 31 timesr g3 times
124 times
l. Assign these thre€ overhead cost poots to each ofthe two
proclucts using ABC. {Do not round your
interrnediafe Ealculations and round llnal ansl,v€rs to lhe
neared dollar amosnl Omit th; '.$..
dgn iin your response.)
Product Assigned cost
Rounded edge $,
Squared edge $
2. Detenrnine a,erage cost per foot for each of the two prcducl.j
using ABC. (Do not round your
intermediste calculations. Round your answers to 2 decirn;rl
places. omit the .'$,. sign in your
respc'nse.)
Rounded edge Squared edlF
Averirge cost per foot (ABC) $ $

3. Direct materials
Direct labor
W *rk*ktze2
Fx*r*rs* 1",7-t 4,Acflvdy-#a$## sosffr?g *f oy*rhe*rj
r"*" P3
Rounded Edge Squan:d Edge Total
$ 9,300 $zt,6oo $ 3o,goo
6,200 1 1,900 18,100
2.
Fxercise 1 i7-t 5 Activity-based cosfing L.O. PJ
Health Co-op is an outpatient surgical clinic that was profitable
for rrrany years, but Medicare has cut its
reimbursements by as much as 50%. As a result, the clinic
wants to better understand its costs. lt decides
to prepare an actiVtyiased cost analysis, including an estimate
of thr: 6rpr6gg cost of both general surgery
1t11
3t17t13
3.
Aisignrnent Print View
and orthopedic surgery. The clinic's three cost centers and their
c(rst driwrs follow.
Cost Center Cost Cost Drir,rer

4. Professional salaries . $ 1,2gg,000 professional l.rours
Patient seruices and supplies 2132A Number of palients
Buildirrgl cost 113,600 Square feet
The twcl rnain surgical units and their related data follow.
Service
Generill surgery
Ofthopedic surgery
Cost Center
Prcilessional salaries
Patient senices & supplies
Buildiing cost
Design de,partment
Clienll consultation
Drawings
Mode,lling
Project rnianagement departm ent
Superrision
Billings
Collections
Cost per driwr
$ 140.00 per hour ["''
$ 41 .00 per patient Lo''
$ 80.00 per sq.ft vr''
Activities
1,300 contact hours
2,800 design hours

5. 45,000 square feet
1,200 days
9 jobs
9 jobs
Drirer Quantity
9,200
520
1,420
Costs .'
.:
t; 247,000
1681000
36,000
$ 216,ooo
g,200
17,450
er:tirlty cost pools where appropriate.
iir Srmur respx*nse.$
Hours Square Feet* Flatients
2,100 560 360
7J0A 860 rca
" Orthopedic surgery requires more space for patients, supplies,
anll equipment.
Required

6. {. Compute the cost per cost drirer for each of the three cost
centers. {Omit the ,,$,, sign in yourresponse.)
2' Use the results fom part 1 to allocate costs fom each ofthe
three cost centers to both the general
surgery and the orthopedic surgery units. compute total cost at d
alerage cost per patient for both the
general surgery and the orthopedic surgery units. {omit the '-$"
r;ign in }our response.}
General surgery Orttropedic suq;€ry
Total cost $ $
Ar,erage cost per patient $ $
W wykshs*Ett
Exgycise 17-12 Using ABC in a service campany L.O. p3
Singh and Smythe is an architectural lim that pror,ides seniices
for residential construc{ion projects. The
tollowing data pertain to a recent reporting period,
Required:
1. using ABC, compute the firm's actir,ity orcrhead rates. Fonn
{ffi*u*'ru$ ysx*r ffiilswsrw *s fr dec$rw** p$m*es. #rm$t tf}*
**$no s*gxr
Clienll consultation
Drawings
Modeling
Supenrrision
Billings/Collection

7. Client consultation
Drawirrgls
Modeliing
Superrdsion
ezto, ntrec| oud. rrcg ravr hi I lr . r:omftrm.tpx
$ 19o.oo
$ 60.00
$ o.Bo
$ 1go.oo
$ 2,850,00
/con. hr. ir'
/design hr. l- '
/sq.ft.
,, b,,n'"
lday
U
ljab '
Assign costs to a 8,400 square fi)ot job that requires 490
contar:rt houF, 34g design hours, and 22o
days to complete. (Round your intermediate calcuiations lo 2
rlecimal plaees. omit the ..g.. sign
in your response,) t
93, 100.00 ''*/
20,880;00 L'

8. J,
6,72(L00 L'
39,600.00 L./''
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3117t13
4.
Billings/Collection
Toliall cost of job
.3'
' As:iignrnent Print View
t!2,950.00 'r'
$ 163, f 50.00 v'
Yleurtryry
Wsrksheet
Ex*rcis* l7-12 Usrng A#C in a se{vi#* c*rftpany L.*.
p3
Fxercrse '17-11 Using ABC lo assess pnbes L.O. AZ, pg
Real Cool produces two different models of air conditionem.
Th,e company produces the mechanical
systems in their components department. The mechanical

9. sysl:ems are combined with the housing
assembly in its fnishing department. The activities, costs, anrj
dri,ers associated with these two
manufactwing processes and the poduction support process
follow
Procerss Activity
Components Changeowr
Machining
Setups
Finishing Welding
lnspecting
Rework
Supporl. Purchasing
Providing space
Providing utilities
Model 145
Units pniduced 1,000
Welding hours 1,000
Batches; 355
Number of inspections 4gA
Machine, hourc 2,TSA
Setups 110
Rework rorders 140
Purchase orders 340
Owrhead Cost Drirrc r'
$ 514,750 Number of batches
380,359 Machine hourr;
405,900 Number of selups

10. $ 1,301,009
$ 286,120 Welding houni,
299,700 Number of ins lrections
uo:1ol Rework orden;
$ 636,220
$ 193,800 Purchase ordr:rs
30,400 Number of unil:s
60,320 Number of unils
Quantity
71A
9,1 10
220
4,600
810
240
510
4,900
4,900
$ 2U,520
Additionarl production information conceming its two product
lines foll:lws.
Model 212
3,2A0
3,600

11. 355
320
5,360
110
100
170
Required:
l. Using ABC, compute the overhead cost per unit for each
product line- {Round your intermediate
*alcufiations and tinal anawers lo 2 decimal places omit the *$"
sign in your response.]
Product
Modr+l 145
Model 212
Prodtilc:t
Moderl 145
Model ,212
Moder,l 145
Mode'il 212
Overhead cost
per unit
per unit
Total cost

12. $ per unit
$ per unit
2. Detennine the total cost per unit for each product line ifthe
direc:t labor and direct materials costs per
unit are $250 for Model 145 and $122 for Model 212. (Round
youl intermediate and final ansarers to
2 decinnal places Ornil the "$" rjgn in your response.)
3. AssumeifthemarketpticeforModel
145is$T55andthemarketl)riceforMcd/el2l2is$610,determine
the proft or loss per unit for each model. {lnput all amountii as
positive valuer Round your
intermediate and final anslrrers lo 2 deciftal place* Omit tht,
..$. rign in your response,)
ffi$
ffi$
eta.n*tecl rud. nrcg ravr hi I L com/hm. tpx 3t11
917t13
5.
I
Department
Mixing deqartment
Liquid rmaterials
Dry materials
Utilitiels

13. 'l' }. "rrtt:;i
;::nt*$es *n
l;
3"bJqf
:l,irrln Ewtuating producf trne cosfs andprbes usrng A
fftre rollo ryle information appft'es fo tfte guesfions dl'qplaye d
below.]
I
UIorksipeet
l'
li
FxercrSp 17-I f Usrng ABC fc assess prices l.O. Aa
P3i
l,
g nrnent Prirf Vieur
' 1T-AA ldentif - -rq$*s$
"ad"";ntafies +riivity*baser.l
Data about these products
;i:rfipe* cf
your intennediate calculatians
it the "$" sign in yaur respcnse,)

14. found intermediate calculations
I"-... .'..... ..t-... ....
ir,l
'r
l{,,
I
r,
'{1.
I
, 1....;r .-i +'*+l.J liL
I
I
lr
ii
Productiofi r,olume
Liquid materials
Dry materials
Bottles i ,
Labels i i
Machine Jetups
. Machine fisurs
i
i,
Additional flata from

15. Driver
Gallons
Pounds
Machine hours
Bottling department
i
Bottles Units
Labeliilrg Labels per botile
Machife se!.up- Setups
I
I
ProS fem f ff f ,+ EvaJuafrng producf Jine cosfs and
pnces usrngiABC l.O. Ps
I'
Difficulty Hard
il;
I
I*i,
ir
PowerPunch Slimlife
12,5AA boftles 2gA,00O botfles
2,000 gallons 39,000 gallons
720 pounds 4,000 por.rnds
12,500 bottles 290,000 botiles

16. 5 labels per bottle 1 label per
500 setups 600 setups
its two production departments follow.
C,ost
$ 2,870
1,416
790
$175,59A
13,7AO
44,Affi
ill
t,
I
Prablem 17i1A Part 1
Required
1, Detern{ine the cost of each product line using Atsc. {sa not
ro
and rs[thd yoilr final anslflsr$ to th* neares dollar amCIilnt,
i
i***""{t
Problem
{So n
u11

17. 3117113
Probl*m 1,7-1A Part 3
3. Assqme if PcnrerPunch sells far $7 "45 per botfie, how rnuch
pn
PowfrPunch that it sells? {Do not round intermediate calcul
nnnrTt Print Meur
l"$" sisn in ycur respanse,)
i
$limLiFe
*+! "-.n^.n-r
*:$"- r*.ri
i/ bottle
:[':. ::::'',:::].: .'..' .:u...-: :..r ri..:
does the comqny @rfi per botttre of
o*s *nd rcund ysur final an$ri/ers
7.
to Z hecimal ptracesi Smit the "$" sign in your respon*e.!
li
Profit per bottle $ : :
li
Learning Qbi

18. i
B.
I
Problem 117:1A Part 4
4. What isitp're rninimum price that the company should set per
bottle
I
i,:.'li. .':'.;:.. 1.: rVit",'.:
t,j:'t; $0,74 perbotde
I
*}1 $o.s+ per botue
i:] i gr .oe per bofle
ftfrultiple Chaice
I
I
Prablem, 17-1A Part 4
I
ii
li
I
I

19. I
I
Prablem ITFA Applying acfiwfy-based cosfing l.O, P|, P3, AI,
[The tollowirlg rnformafion applres rb fhe guesfrbns disptaye d
below.]
I
Crafrmore &lachining produces machine tools for the
eonstruction
overhead cdsts were taken from its company records.tl
I
Production Activity
Grinding
I
Polishing
I
Pnrduct modification
Providing power
Systgm cei!1brati91
I
Additional iriformation on the dritrerc for its production
actir,ities fdlorrs.
I
lr

20. I
Grinding
i
Polishing
i
Product modification
Providing pou/er
Syqtem cdlibration
I
I
-.)., -+-.' ---. "..,.....
$ection Brdak
I
Prah lem t iyin Appfying activity-based casting L-O.
Pt, P3, Af , flz, C3
I
i
I,
Worksf]eet
i
rran e7t7 IAPart3

21. lr
Difficulty Hard
products using
: 17 -?3 Allscate awrhead costs tc
ivitpbased castirg.
SlimLife?
c3
stry. The following details about
lndirect Labor lndirect Materials
$ 320,000
$ 200,000
550,000
520,000
Ovefiead
260,000
9,000 machine hours
9,000 machine hours
1,900 engineering hours
14,000 direct labor hours
780 batches
ezto.nfpcl ud.nng r aiFhi l[ .conrfhm.tpx
I

22. ,; '.r* 'fiStS t0
5t11