FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Comparing ABC and Plantwide Overhead Cost Assignments
Wellington Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs:
Setting up equipment
Other overheard
Setting up equipment is based on setup hours, and other overhead is based on oven hours.
Wellington produces two products, Fudge and Cookies. Information on each product is as follows:
Units produced
Setup hours
Oven hours
$280,000
$1,848,000
Required:
Fudge
8,000
5,600
1,400
Cookies
445,000
1,400
9,800
Round your answers to the nearest whole dollar, unless otherwise directed.
1. Calculate the activity rate for (a) setting up equipment and (b) other overhead.
a. Setting up equipment
per setup hour
b. Other overhead
per oven hour
2. How much total overhead is assigned to Fudge using ABC?
3. What is the unit overhead assigned to Fudge using ABC? Round to the nearest cent.
per unit
4. Now, ignoring the ABC results, calculate the plantwide overhead rate, based on oven hours. Round to the nearest cent.
per oven hour
expand button
Transcribed Image Text:Comparing ABC and Plantwide Overhead Cost Assignments Wellington Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs: Setting up equipment Other overheard Setting up equipment is based on setup hours, and other overhead is based on oven hours. Wellington produces two products, Fudge and Cookies. Information on each product is as follows: Units produced Setup hours Oven hours $280,000 $1,848,000 Required: Fudge 8,000 5,600 1,400 Cookies 445,000 1,400 9,800 Round your answers to the nearest whole dollar, unless otherwise directed. 1. Calculate the activity rate for (a) setting up equipment and (b) other overhead. a. Setting up equipment per setup hour b. Other overhead per oven hour 2. How much total overhead is assigned to Fudge using ABC? 3. What is the unit overhead assigned to Fudge using ABC? Round to the nearest cent. per unit 4. Now, ignoring the ABC results, calculate the plantwide overhead rate, based on oven hours. Round to the nearest cent. per oven hour
5. How much total overhead is assigned to Fudge using the plantwide overhead rate?
$
6a. The difference in the total overhead assigned to Fudge is different under the ABC system and non-ABC system because
6b. What is the difference in total overhead assigned to fudge under the two methods?
expand button
Transcribed Image Text:5. How much total overhead is assigned to Fudge using the plantwide overhead rate? $ 6a. The difference in the total overhead assigned to Fudge is different under the ABC system and non-ABC system because 6b. What is the difference in total overhead assigned to fudge under the two methods?
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