AC Homework

Problem 1:

Mathias Company manufactures a number of specialized machine parts. Part Bunkka-22 uses $35 of direct materials and $15 of direct labor per unit.

Mathias’ estimates manufacturing overhead is as follows:

Materials handling	$100,000
	Machining Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	200,000
	Factory supervision	150,000
Total	$450,000

Overhead is applied based on direct labor costs, which were estimated at $200,000.

Mathias is considering adopting activity-based costing. The cost drivers are estimated at:

Machining

Factory supervision

Activity	Cost Driver	Expected Use
Materials Handling	Weight of materials	50,000 pounds
Machine hours	20,000 hours
Direct labor hours	12,000 hours

1. Compute the cost of 1,000 units of Bunkka-22 using the current traditional costing system.
2. Compute the cost of 1,000 units of Bunkka-22 using the proposed activity-based costing system. Assume the 1,000 units use 2,500 pounds of materials, 500 machine hours, and 1,000 direct labor hours.

Problem 2:

In the month of March, New Day Spa services 570 clients at an average price of $120. During the month, fixed costs were $21,000 and variable costs were 65% of sales.

1. Determine the contribution margin in dollars, per unit, and as a ratio.
2. Using the contribution margin technique, compute the break-even point in dollars and in units.

Sheet1

(b)

			Problem 1
(a)
	(b)
Problem 2:
(a)	Contribution margin in dollars:
Contribution margin per unit:
Contribution margin ratio:
Break-even sales in dollars:
Break-even sales in units:

Sheet2

Sheet3