Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes. Activity (Cost) Cost Driver Machine maintenance ($370,000) Number of machine hours Setups ($750,000) Number of setups Deluxe 370 40 Type of Textbook Moderate Economy 1,110 20 1,480 15 Packing ($190,000) Photo development ($762,000) Number of cartons Number of pictures 20 30 50 5,900 3,900 2,900 Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include pictures only in chapter openings. Required a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books during the prior year: Deluxe 50,000 Moderate 150,000 Economy 200,000 Determine the overhead cost per book for each book type. b. Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced with an activity-based costing system. Note: For all requirements, round your answers to 2 decimal places.
Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes. Activity (Cost) Cost Driver Machine maintenance ($370,000) Number of machine hours Setups ($750,000) Number of setups Deluxe 370 40 Type of Textbook Moderate Economy 1,110 20 1,480 15 Packing ($190,000) Photo development ($762,000) Number of cartons Number of pictures 20 30 50 5,900 3,900 2,900 Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include pictures only in chapter openings. Required a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books during the prior year: Deluxe 50,000 Moderate 150,000 Economy 200,000 Determine the overhead cost per book for each book type. b. Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced with an activity-based costing system. Note: For all requirements, round your answers to 2 decimal places.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three
types of textbooks the company publishes.
Activity (Cost)
Cost Driver
Deluxe
Type of Textbook
Moderate
Economy
Machine maintenance ($370,000)
Setups ($750,000)
Number of machine hours
370
Number of setups
Packing ($190,000)
Photo development ($762,000)
Number of cartons
Number of pictures:
40
20
1,110
20
1,480
15
30
5,900
3,900
50
2,900
Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with
three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include
pictures only in chapter openings.
Required
a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books
during the prior year:
Deluxe
50,000
Moderate
150,000
Economy
200,000
Determine the overhead cost per book for each book type.
b. Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced
with an activity-based costing system.
Note: For all requirements, round your answers to 2 decimal places.
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