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1. Using ABB principles, justify the workforce needed for the cake decorating department within the local grocery store. The following data is available regarding the time necessary to bake and assemble small, large, and wedding cakes, as well as the time necessary to decorate each of these products.
The baking and assembling of the cakes is broken down into "units." It takes an employee 1 hour to bake and assemble 4 units.
A small cake represents
A small cake represents 1 unit
A small cake represents
A large cake represents
A wedding cake represents
Small cakes budgeted to be made
Large cakes budgeted to be made
Wedding cakes budgeted to be made
2. Slayton Enterprises produces computer equipment and programs for heavy equipment manufacturers. One of the most important parts of the company's new just-in-time production process is quality control. Initially, a traditional cost accounting system was used to assign quality control costs to products. All of the costs of the Quality Control Department were included in the plant's overhead cost rate and allocated to products based on direct labor dollars. Recently, the firm implemented an activity-based costing system. The activities, cost drivers, and rates for the quality control function are summarized below, along with cost allocation information from the traditional system. Also shown is information related to one order of the Ace computer line.
Traditional Costing Approach:
Quality control costs were assigned at a rate of 9% of direct labor dollars.
Order Ace 18:
Charged with $15,500 of direct labor costs.
Activity-Based Approach for the Quality Control Function:
Cost Assignment Rates
Order Ace 18 Activity Usage
Incoming Materials Inspection
Type of material used
$15.75 per type of material
10 types of material
Number of products
$0.95 per product
Tool and Gauge Control
Number of processes per cell
$7 per process
$65 per order
1. Compute the quality control cost that would be assigned to the Ace order under both the traditional approach and the activity-based costing approach to cost assignment.
2. What was the impact on the costs assigned to the Ace order as a result of shifting to the activity-based costing approach?
3. The Bear and Bull Company produces two products: bears and bulls. The following information is available:
Unit Selling Price
Unit Variable Costs
Unit Contribution Margin
Given the stated sales mix, how many bulls will need to be sold in order to obtain a profit of $60,000?
A large cake represents 2 units
A wedding cake represents 4 units