Managerial Analysis 17
Managerial Analysis 17-2
Alberto Nicholas.
University of Phoenix
ACC561/PD14MBA08
June 18, 2015
Dr. Norris Dorsey
Managerial Analysis 17-2
A) Compute the activity-based overhead rate for each activity pool.
Activity Cost pools
Cost Driver
Annual Cost
Total estimated Drivers
Activity-based overhead rate
Market Analysis
Hours of Analysis
$1,050,000
15,000 hours
$70.00
Product Design
Number of Designs
$2,350,000
2,500 designs
$940
Product Development
Number of Products
$3,600,000
90 products
$40,000
Prototype Testing
Number of Test
$1,400,000
500 test
$2800
B) How much would be charged to an in-house manufacturing department that consumed 1,800 hours of market analysis time, was provided 280 designs relating to 10 products, and requested 92 engineering test?
Activity Cost pools
Cost Driver
Annual Cost
Total estimated Drivers
Activity-based overhead rate
Market Analysis
Hours of Analysis
$1,050,000
1800 hours
Product Design
Number of Designs
$2,350,000
280 designs
Product Development
Number of Products
$3,600,000
10 products
Prototype Testing
Number of Test
$1,400,000
92 test
C) How much cost would serve as the basis for pricing an R&D bid with an outside company on a contract that would consume 800 hours of analysis time, require 178 designs relating to 3 products, and result in 70 engineering test?
Activity Cost pools
Cost Driver
Annual Cost
Total estimated Drivers
Activity-based overhead rate
Market Analysis
Hours of Analysis
800 hours
Product Design
Number of Designs
178 designs
Product Development
Number of Products
3 products
Prototype Testing
Number of Test
70 test
D) Both methods estimate overhead costs related to production and then assign these costs to products based on a cost-driver rate. The differences are in the accuracy and complexity of the two methods. Traditional costing is more simplistic and less accurate than ABC, and typically assigns overhead costs to products based on an arbitrary average rate. ABC is more complex
Alberto Nicholas.
University of Phoenix
ACC561/PD14MBA08
June 18, 2015
Dr. Norris Dorsey
Managerial Analysis 17-2
A) Compute the activity-based overhead rate for each activity pool.
Activity Cost pools
Cost Driver
Annual Cost
Total estimated Drivers
Activity-based overhead rate
Market Analysis
Hours of Analysis
$1,050,000
15,000 hours
$70.00
Product Design
Number of Designs
$2,350,000
2,500 designs
$940
Product Development
Number of Products
$3,600,000
90 products
$40,000
Prototype Testing
Number of Test
$1,400,000
500 test
$2800
B) How much would be charged to an in-house manufacturing department that consumed 1,800 hours of market analysis time, was provided 280 designs relating to 10 products, and requested 92 engineering test?
Activity Cost pools
Cost Driver
Annual Cost
Total estimated Drivers
Activity-based overhead rate
Market Analysis
Hours of Analysis
$1,050,000
1800 hours
Product Design
Number of Designs
$2,350,000
280 designs
Product Development
Number of Products
$3,600,000
10 products
Prototype Testing
Number of Test
$1,400,000
92 test
C) How much cost would serve as the basis for pricing an R&D bid with an outside company on a contract that would consume 800 hours of analysis time, require 178 designs relating to 3 products, and result in 70 engineering test?
Activity Cost pools
Cost Driver
Annual Cost
Total estimated Drivers
Activity-based overhead rate
Market Analysis
Hours of Analysis
800 hours
Product Design
Number of Designs
178 designs
Product Development
Number of Products
3 products
Prototype Testing
Number of Test
70 test
D) Both methods estimate overhead costs related to production and then assign these costs to products based on a cost-driver rate. The differences are in the accuracy and complexity of the two methods. Traditional costing is more simplistic and less accurate than ABC, and typically assigns overhead costs to products based on an arbitrary average rate. ABC is more complex