Cullumber Inc. makes two types of handbags: standard and custom. The controller has decided to use a plant-wide overhead rate based on direct labour costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining (machine hours) and machine set-up (number of set-ups). The total estimated machine hours is 1,500, and the total estimated number of setups is 500. Presented below is information related to the company's operations. Direct labour costs Machine hours Set-up hours Standard $50,000 (a) 500 100 Custom $100,000 1,000 Total estimated overhead costs are $360,000. The overhead cost allocated to the machining activity cost pool is $187,500, and $172,500 is allocated to the machine set-up activity cost pool. Predetermined overhead rate 400 Calculate the overhead rate using the traditional (plant-wide) approach. % of direct labour cost SUF

Cullumber Inc. makes two types of handbags: standard and custom. The controller has decided to use a plant-wide overhead rate based on direct labour costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining (machine hours) and machine set-up (number of set-ups). The total estimated machine hours is 1,500, and the total estimated number of setups is 500. Presented below is information related to the company's operations. Direct labour costs Machine hours Set-up hours Standard $50,000 (a) 500 100 Custom $100,000 1,000 Total estimated overhead costs are $360,000. The overhead cost allocated to the machining activity cost pool is $187,500, and $172,500 is allocated to the machine set-up activity cost pool. Predetermined overhead rate 400 Calculate the overhead rate using the traditional (plant-wide) approach. % of direct labour cost SUF

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Fountain Water Products (FWP) manufacturers water bottles. They have historically used a traditional system that allocated the manufacturing overhead costs based on machine hours. FWP is looking at switching to an ABC system in order to ensure more accurate product costing. They first want to compare the traditional and ABC costing systems to determine if it is worth the effort and costs to implement and maintain. They estimate a total overhead cost of $459,000. Under the traditional system they identified machine hours as the cost driver, and estimated a total of 51,000 machine hours. They actually incurred 48,700 machine hours in production. The total applied MOH calculated under the more precise ABC system was $320,000. The ABC costing system will cost $50,000 to implement. FWP has determined that a benefit of more accurate costing by $80,000 is worth the $50,000 implementation cost. What is the difference between the ABC costing and traditional system? Enter your number as a…
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The Matilda produces two products, Alpha and Beta, and uses the conventional method of allocating overhead based on direct labor cost. The management decided to adopt the ABC System of costing. The number of setups and the number of design hours were selected as the activity drivers for the two new cost pools, and direct labor cost will continue as the base for allocating the remaining overhead. Information below is available. For the current period, the eatery had the following activities: 1. Using the ABC System, The total production cost for Alpha is2. Using the ABC System, The Overhead applied to Job Custom is 3. Using conventional method, the overhead assigned to Job Beta is