6-35 Comprehensive problem with ABC costing

6-35 Comprehensive problem with ABC costing

6-35 Comprehensive problem with ABC costing

6-35 Comprehensive problem with ABC costing

Animal Gear Company makes two pet carriers, the
Cat-allac and the Dog-eriffic. They are both made of plastic with metal doors,
but the Cat-allac is smaller. Information for the two products for the month of
April is given in the following tables:

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Animal Gear accounts for direct materials using a FIFO
cost flow assumption.

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Animal Gear uses a FIFO cost flow assumption for
finished goods inventory.

Animal Gear
uses an activity-based costing system and classifies overhead into three
activity pools: Setup, Processing, and Inspection. Activity rates for these
activities are $105 per setup-hour, $10 per machine-hour, and $15 per
inspection-hour, respectively. Other information follows:

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Nonmanufacturing fixed costs for March equal $32,000,
half of which are salaries. Salaries are expected to increase 5% in April. The
only variable nonmanufacturing cost is sales commission, equal to 1% of sales
revenue.
Prepare the following for
April:

Required:
1. Revenues budget
2. Production budget in units
3. Direct material usage budget and direct material
purchases budget
4. Direct manufacturing labor cost budget
5. Manufacturing overhead cost budgets for each of the
three activities
6. Budgeted unit cost of ending finished goods inventory
and ending inventories budget
7. Cost of goods sold budget
8. Nonmanufacturing costs budget
9. Budgeted income statement (ignore income taxes)
10. How does preparing the budget help Animal Gear’s
management team better manage the company?

 

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