Critical Thinking Assignment  

Complete the following questions using Microsoft Excel. No other submission format is allowed. Review the grading rubric to confirm you are meeting the assignment requirements.  

Consider the following information for Hamburg Corporation: 

Items 

Units 

Beginning inventory 

85,000 

Units started during the year 

155,000 

Ending inventory 

61,000 

Inventory is 100% complete as to materials and 60% complete as to conversion. 

Items 

Materials 

Conversion 

Beginning costs (SAR) 

425,000 

686,000 

Costs added during the period (SAR) 

1,255,000 

980,000 

Using the WEIGHTED AVERAGE method: 

1. Calculate the number of units completed during the period. 
2. Calculate equivalent units for conversion during the period. 
3. Calculate cost per equivalent units for materials. 

Mannheim Corporation manufactures small camping tents and family camping tents. The estimated direct labor time to produce each type of tent is as follows: 

Items 

Small 

Family 

Estimated tents produced 

24,500 

11,000 

Direct labor hours per tent 

2.5 

4.5 

Estimated overhead for the period = 1,300,000 SAR. 

1. Compute the overhead cost assigned to each type of tent assuming direct labor hours are used to allocate overhead costs. 

The controller is not satisfied with the traditional method of allocating overhead because he believes that most of the overhead costs relate to the family tent product line because of its complexity. He, therefore, developed the following three activity cost pools and related cost drivers to better understand the costs.  

Activity Cost Pools 

Expected Use of Cost Drivers 

Estimated Overhead Costs (SAR) 

Setting up machines 

1,000 setups 

25,000 

Assembling 

90,000 labor hours 

980,000 

Inspection 

1,200 inspections 

230,000 

1. Calculate the activity-based overhead rates for these three cost pools. 
2. Compute the cost that is assigned to each tent using activity-based costing system, given the following information. 

Expected Use of Cost Drivers per Product 

Items 

Small 

Family 

Number of setups 

130 

825 

Direct labor hours 

29,000 

55,000 

Number of inspections 

125 

1,125 

1. What do you believe the controller should do and why? 

You must show your work for credit 

 Required: 

• Chapter 4 in Managerial Accounting
• Falat, K. (2019). Changes in the product costing process driven by implementation of an integrated information system in a production company. Financial Internet Quarterly “e-Finanse,”15(4), 25–33. http://doi.org/10.2478/fiqf-2019-0025
• Więcek, D., Więcek, D., & Dulina, L. (2020). Materials requirement planning with the use of activity based costing. Management Systems in Production Engineering, 28(1), 3–8. https://doi.org/10.2478/mspe-2020-0001