Answered: Traditional Product Costing Versus Activity-Based Costing High Country Outfitters, Inc., makes backpacks for large sporting goods chains that are sold under the…

FINANCIAL ACCOUNTING

10th Edition

ISBN: 9781259964947

Author: Libby

Publisher: MCG

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Can you please answer A and fill in the table; please show me how you got those numbers and any formulas or rules used. I want to be able to understand.

note: use ABC method

Transcribed Image Text:Traditional Product Costing Versus Activity-Based Costing High Country Outfitters, Inc., makes backpacks for large sporting goods chains that are sold under the customers' store brand names. The accounting department has identified the following overhead costs and cost drivers for next year: Overhead Item Expected Costs Cost Driver Setup costs $1,216,800 Number of setups Ordering costs 312,000 Number of orders Maintenance 1,200,000 Number of machine hours 120,000 Number of kilowatt hours Power Maximum Quantity 7,200 60,000 80,000 600,000 Total predicted direct labor hours for next year is 60,000. The following data are for two recently completed jobs: Job 201 Job 202 $15,000 $16,500 Cost of direct materials Cost of direct labor $20,625 $72,750 Number of units completed 1,125 915 Number of direct labor hours 270 330 Number of setups 18 22 Number of orders 24 45 Number of machine hours 540 450 Number of kilowatt hours 270 360 a. Determine the unit cost for each job using a traditional company-wide overhead rate based on direct labor hours. Round rate to two decimal places. Overhead rate per direct labor hour $0

NOTE: Round all answers (except cost per unit) to the nearest whole number, when applicable. Round cost per unit answers
to two decimal places.
Direct materials
Direct labor
Overhead
Setup cost
Ordering costs
Maintenance costs
Power
Total job costs
Units produced
Cost per unit
$
$
$
Job 201
0
0
$
0
0
0
0
0 $
0
0 $
Job 202
0
0
0
O
0
0
0
0
0

Expert Solution

Step 1: Introduction

Traditional Method of Overhead allocation allocates the overheads based on either Direct Material, Direct Labor Hours or Machine Hours etc.
But under Activity Based Costing (ABC), overheads are allocated to the jobs based on activities consumed by such jobs.
ABC helps in better and fair allocation of overheads to the jobs and this will result in fair calculation of unit cost and its price.

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