Cost Accounting Excel Project 1 Cost Allocation Fall 2014

Purpose:The purpose of this assignment is to provide an introduction to the vertical lookupfunction (=vlookup). The assignment will also require you to apply OH toproducts based on various cost driversAbout vlookup (from Excel help):Searches for a value in the first column of a table array and returns a value in thesame row from another column in the table array.The V in VLOOKUP stands for vertical. Use VLOOKUP instead of HLOOKUPwhen your comparison values are located in a column to the left of the data thatyou want to find.VLOOKUP(lookup_value,table_array,col_index_num,range_lookup)Lookup_value The value to search in the first column of the table array (array:Used to build single formulas that produce multiple results or that operate on agroup of arguments that are arranged in rows and columns. An array rangeshares a common formula; an array constant is a group of constants used as anargument.). Lookup_value can be a value or a reference. If lookup_value issmaller than the smallest value in the first column of table_array, VLOOKUPreturns the #N/A error value.Table_array Two or more columns of data. Use a reference to a range or arange name. The values in the first column of table_array are the valuessearched by lookup_value. These values can be text, numbers, or logical values.Uppercase and lowercase text are equivalent.Col_index_num The column number in table_array from which the matchingvalue must be returned. A col_index_num of 1 returns the value in the firstcolumn in table_array; a col_index_num of 2 returns the value in the secondcolumn in table_array, and so on. If col_index_num is:Less than 1, VLOOKUP returns the #VALUE! error value.Greater than the number of columns in table_array, VLOOKUP returns the#REF! error value.Range_lookup A logical value that specifies whether you want VLOOKUP tofind an exact match or an approximate match:If TRUE or omitted, an exact or approximate match is returned. If an exactmatch is not found, the next largest value that is less than lookup_value isreturned.The values in the first column of table_array must be placed in ascendingsort order; otherwise, VLOOKUP may not give the correct value. You canput the values in ascending order by choosing the Sort command from theData menu and selecting Ascending. For more information, see Defaultsort orders.If FALSE, VLOOKUP will only find an exact match. In this case, the valuesin the first column of table_array do not need to be sorted. If there are twoor more values in the first column of table_array that match thelookup_value, the first value found is used. If an exact match is not found,the error value #N/A is returned.RemarksWhen searching text values in the first column of table_array, ensure thatthe data in the first column of table_array does not have leading spaces,trailing spaces, inconsistent use of straight ( ‘ or " ) and curly ( or )quotation marks, or nonprinting characters. In these cases, VLOOKUPmay give an incorrect or unexpected value. For more information onfunctions that you can use to clean text data, see Text and Data functions.When searching number or date values, ensure that the data in the firstcolumn of table_array is not stored as text values. In this case, VLOOKUPmay give an incorrect or unexpected value. For more information, seeConvert numbers stored as text to numbers.If range_lookup is FALSE and lookup_value is text, then you can use thewildcard characters, question mark (?) and asterisk (*), in lookup_value. Aquestion mark matches any single character; an asterisk matches anysequence of characters. If you want to find an actual question mark orasterisk, type a tilde (~) preceding the character.Example: (From: Edmonds, T. P., Tsay, B. and Olds, P. R. (2008).Fundamental Managerial Accounting Concepts. pp. 290-291 (ATC 6-7) McGrawHill Irwin.)In order to determine the effect of different cost drivers on the overhead allocatedand the resulting cost per unit this problem used the vlookup function.There are four possible cost drivers (Unit, Setup, Machine Hour, and LaborHour). The overall overhead cost that needs to be allocated between the threeproducts is $500,000. This spreadsheet was created so that by just changing thenumber in cell B15 (1 = unit, 2 = setup, 3 = machine hour, and 4 = labor hour) theamount of the allocation base (cell E15) is updated to so that a particular costdriver can be analyzed. In this example units are being used as the cost driver.The spreadsheet then calculates the overhead allocated per unit and applies thatoverhead to each product.Cell C15 is = VLOOKUP (B15, B4:K7,2). This function operates by using the one(1) in cell B15 to look up a value in the table (the table is cells B4:K7). Thefunction then matches the 1 and returns the value in the second (2) column,which is unit.Cell E15 is = VLOOKUP(B15, B4:K7,10). In this case, the function returns thevalue in the 10th column (must count all columns even empty ones).Cell E20 is =VLOOKUP(B15, B4:K7, 4)*$G$15. In this case, the function returnsthe value in the 4th column and then multiplies it by the value in cell G15.Assignment:17th Logan Inc produces four types (Special, Stylish, Basic, Industrial) of widgets.Data has been collected related to direct materials and direct labor for the fourwidgets. 17th Logan Inc has also collected information on five possible costdrivers (units, setups, machine hours, labor hours, total direct costs {also knownas prime cost}). All this information is listed below. Construct a spreadsheet thatwill allocate overhead and calculate unit cost for each of these alternative drivers.Use the VLOOKUP function when constructing the spreadsheet so that you candetermine the effect of different cost drivers on the overhead allocated and theresulting cost per unit.WidgetDirectMaterialDirectLaborUnits# ofSetupsMachineHoursLaborHoursSpecialStylish$61,000$64,000$48,000$60,75015,00023,0005254,0008,000450675Basic$150,000$80,00045,000209,000800Industrial$152,000$100,00056,000106,5001000Total overhead cost to be allocated: $968,000After constructing your spreadsheet answer the following questions?1. What is the cost per unit of each widget when machine hours are used asthe cost driver for overhead allocation?2. How much overhead is allocated to the Special widget when direct costsare used as the cost driver for overhead allocation?3. What is the total cost of the Basic widget when direct labor hours are usedas the cost driver for overhead allocation?4. What is the cost per unit of the Stylish widget when the number of setupsis used as the cost driver for overhead allocation?5. Which cost driver would you recommend that Mikeys Paws and Thingsuse to allocate their overhead? Why?Other informationYou may consult with other class members for clarificationpurposes, but you must build the spreadsheet and answer thequestions yourself. All Excel and Word files must be built fromscratch. Any violations will result in a zero on the project.You must create a nicely formatted Excel spreadsheet for thecalculations, you need to create either a word document orseparate worksheet within your Excel file to answer the questionsYou will submit your assignment through the Blackboardassignment tool.The calculation worksheet should be set up so that it will print onone page. Format the assignment so that it looks appropriate.Grading: 10 points for format/presentation; 10 points for Excel formulasand answer; 10 points for written answers