Serenity Now Industries Manufactures Custom Fiberglass Hulls for Luxury Yachts

question 85

Essay

Serenity Now Industries manufactures custom fiberglass hulls for luxury yachts and pleasure boats. The current cost accounting system uses machine hours to allocate manufacturing overhead to each job. Serenity estimates that in the coming year it will incur $600,000 in manufacturing overhead costs and use 8,000 machine hours.
Depending on the specifications requested by the customer, the hull may use hazardous chemicals that incur greater disposal costs. Serenity's traditional accounting system includes the cost of hazardous waste disposal in with total manufacturing overhead. Serenity is planning to implement an activity based costing system to more accurately assign hazardous waste disposal costs to each job.
Expected usage and costs for manufacturing overhead are as follows:
During the year, Yacht #633 was started and completed:
Requirements:
a. Calculate the cost of Yacht #633 using the Serenity's current method of allocating manufacturing overhead.
b. Calculate the cost of Yacht #633 using the proposed activity based costing system. How is this information useful to an environmental management accounting (EMA)system?

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Definitions:

Conjunction

In linguistics, a term employed to link clauses or sentences together, or to arrange words within a single clause.

Disjuncts

Components in a logical expression that are combined with an OR operator, where the expression is true if at least one of the disjuncts is true.

Disjunction

An operation in logic that returns true when a minimum of one input is true.

Tautologies

Statements that are true under any possible valuation of their components in logic.