Excel Manufacturing Has an Activity-Based Costing System with Three Activity

question 135

Essay

Excel Manufacturing has an activity-based costing system with three activity cost pools-Machining, Batch Setup, and Other. The company's overhead costs have already been allocated to the cost pools and total $28,000 for the Machining cost pool, $13,800 for the Batch Setup cost pool, and $27,200 for the Other cost pool.
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Batch Setup cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. Data concerning the company's two products and the company's costs appear below:
$$\begin{array} { l c r } & \text { MHs } & \text { Batches } \\\text { Product A } & 5,200 & 500 \\\text { Product B } & 14,800 & 500 \\\text { Total } & 20,000 & 1,000 \\\end{array}$$
$$\begin{array} { l c c } & \text { Product A } & \text { Product B } \\\text { Sales } & \$ 124,300 & \$ 166,000 \\\text { Direct materials } & \$ 53,100 & \$ 71,500 \\\text { Direct labor } & \$ 54,000 & \$ 56,600\end{array}$$
Required:
a. Calculate activity rates for each activity cost pool using activity-based costing.
b. Determine the amount of overhead cost that would be assigned to each product using activity-based costing.
c. Determine the product margins for each product using activity-based costing.

Prepare and interpret consolidated financial statements post-acquisition, including consolidation entries and adjustments.

Understand the impact of business combinations on parent and subsidiary relationships, including control considerations.

Recognize and measure the fair value of assets and liabilities acquired in a business combination.

Understand and apply the methods for accounting for business combinations under IFRS and ASPE.

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Definitions:

Value-based Management

A management philosophy that focuses on creating value for shareholders and stakeholders through effective decision-making and strategic focus.

Economic Value

The measurement of the benefit provided by a good or service to an economic agent. It is typically assessed based on willingness to pay or market price.

Business Decisions

Choices or determinations made by businesses in the course of their operations to achieve objectives, solving problems or making strategic plans.

Group-based Reward System

A compensation strategy where rewards are based on the performance of a group rather than individual achievements.