Concept explainers
Health 'R Us, Inc., uses a traditional product costing system to assign
Instructions
(a) Compute the quality-control overhead cost to be assigned to the low-calorie breakfast product line for the month of June (1) using the traditional product costing system (direct labor cost is the cost driver), and (2) using activity-based costing.
(b) By what amount does the traditional product costing system undercost or overcost the low-calorie breakfast line?
(c) Classify each of the activities as value-added or non-value-added.
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Managerial Accounting: Tools for Business Decision Making
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- Sheridan Toys and Games, Inc manufactures specialty toys. Sheridan uses a traditional products costing system to assign overhead cost uniformly to all products. To meet industry safety standards and to assure its customers of safe and durable toys. Sheridan assigned its quality-control overhead costs to all products at a rate of 22% of direct labor costs. Its direct labor cost for the month of August for its toddler line of toys is 292,000. In response to repeated requests from its financial vice president, Sheridan’s management agrees to adopt activity-based costing. Data relating to the toddler line of toys for the month of August are as follow Activity Cost Pools Cost Drivers Overhead rate Number of Cost Drivers used per Activity Materials Inspection Number of pounds $0,70 per pound 49,000 pounds Assembly Line Inspection Number of finished toys $ 0.16 per toy 168,000 toys National Toy Association Certification Retail orders $2.00 per order…arrow_forwardRouse manufactures coffee mugs that it sells to other companies for customizing with their own logos. Rouse prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a coffee mug is based on static budge volume of 59,700 coffee mugs per month: 4. Journalize the actual manufacturing overhead and the allocated manufacturing overhead. Journalize the movement of all production costs from Work-in-Process InventoryJournalize the adjusting of the Manufacturing Overhead account . 5. Rouse intentionally hired more highly skilled workers during JulyHow did this decision affect the cost variances ? Overall , was the decision wise?arrow_forwardSheridan Toys and Games, Inc manufactures specialty toys. Sheridan uses a traditional products costing system to assign overhead cost uniformly to all products. To meet industry safety standards and to assure its customers of safe and durable toys. Sheridan assigned its quality-control overhead costs to all products at a rate of 22% of direct labor costs. Its direct labor cost for the month of August for its toddler line of toys is 292,000. In response to repeated requests from its financial vice president, Sheridan’s management agrees to adopt activity-based costing. Data relating to the toddler line of toys for the month of August are as follow Activity Cost Pools Cost Drivers Overhead rate Number of Cost Drivers used per Activity Materials Inspection Number of pounds $0,70 per pound 49,000 pounds Assembly Line Inspection Number of finished toys $ 0.16 per toy 168,000 toys National Toy Association Certification Retail orders $2.00 per order…arrow_forward
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