Concept explainers
(a)
Introduction:
The traditional costing system allocates the
To compute:
The overhead assigned using the traditional costing system to the leather case line.
(b)
Introduction:
ABC system was developed to deal with the loopholes of traditional costing system. It helps in finding the total cost of activities that are necessary to make a product. In this method costs are assigned to each activity that goes into production.
To compute:
The overhead assigned to the leather case line using ABC.
(c)
Introduction:
The traditional costing system allocates the overheads on the basis of either the amount of direct labor hours consumed or machine hour used
ABC system was developed to deal with the loopholes of traditional costing system. It helps in finding the total cost of activities that are necessary to make a product.
To compare:
Whether the leather case over or undercosted by the traditional cost system compared to ABC
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Managerial Accounting
- Using the data in P4-2 and Microsoft Excel: 1. Separate the variable and fixed elements. 2. Determine the cost to be charged to the product for the year. 3. Determine the cost to be charged to factory overhead for the year. 4. Determine the plotted data points using Chart Wizard. 5. Determine R2. 6. How do these solutions compare to the solutions in P4-2 and P4-3? 7. What does R2 tell you about this cost model?arrow_forwardCarltons Kitchens three cost pools and overhead estimates are as follows: Compare the overhead allocation using: A. The traditional allocation method B. The activity-based costing method (Hint: the traditional method uses machine hours as the allocation base.)arrow_forwardThe cost behavior patterns below are lettered A through H. The vertical axes of the graphs represent total dollars of expense, and the horizontal axes represent production in units, machine hours, or direct labor hours. In each case, the zero point is at the intersection of the two axes. Each graph may be used no more than once. Required: Select the graph that matches the lettered cost described here. a. Depreciation of equipmentthe amount of depreciation charged is computed based on the number of machine hours that the equipment was operated. b. Electricity billflat fixed charge, plus a variable cost after a certain number of kilowatt hours are used. c. City water billcomputed as follows: d. Depreciation of equipmentthe amount is computed by the straight-line method. e. Rent on a factory building donated by the citythe agreement calls for a fixed fee payment, unless 200,000 labor hours are worked, in which case no rent need be paid. f. Salaries of repair workersone repair worker is needed for every 1,000 machine hours or less (i.e., 0 to 1,000 hours requires one repair worker, 1,001 to 2,000 hours requires two repair workers, etc.).arrow_forward
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