This topic contains a solution. Click here to go to the answer

Author Question: Assume a traditional costing system applies the 160,000 of overhead costs based on direct labor ... (Read 107 times)

amal

  • Hero Member
  • *****
  • Posts: 572
Assume a traditional costing system applies the 160,000 of overhead costs based on direct labor hours.
 
  Rachel's Pet Supply Corporation manufactures two models of grooming stations, a standard and a deluxe model. The following activity and cost information has been compiled:
 
   Number of Number of Number of
  Product Setups Components Direct Labor Hours
  Standard 3 30 650
  Deluxe 7 50 150
 
  Overhead costs 40,000 120,000
 
  a. What is the total amount of overhead costs assigned to the standard model?
  b. What is the total amount of overhead costs assigned to the deluxe model?
 
  Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead.
  c. What is the total amount of overhead costs assigned to the standard model?
  d. What is the total amount of overhead costs assigned to the deluxe model?
  e. Explain the difference between the costs obtained from the traditional costing system and the ABC system. Which system provides a better estimate of costs? Why?

Question 2

Given this change in the cost structure ________.
 
  A) The costing results for chess pieces under the new system depend on the adequacy and quality of the estimated cost drivers and costs used by the system.
  B) Chess pieces have benefited from the new system.
  C) Chess pieces are definitely more accurately costed.
  D) Chess will now have a lower sales price.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

momolu

  • Sr. Member
  • ****
  • Posts: 320
Answer to Question 1

Answer:
a. 160,000 / (650 + 150)  650 = 130,000

b. 160,000 / (650 + 150)  150 = 30,000

c. Setups: 40,000 / (3 + 7) = 4,000
Components: 120,000 / (30 + 50) = 1,500
(4,000  3) + (1,500  30) = 57,000

d. (4,000  7) + (1,500  50) = 103,000

e. Because the products do not all require the same proportionate shares of the overhead resources of setup hours and components, the ABC system provides different results than the traditional system which allocates overhead costs on the basis of direct labor hours. The ABC system considers some important differences in overhead resource requirements and thus provides a better picture of the costs from each grooming table style, provided that the activity measures are fairly estimated.

Answer to Question 2

Answer: A




amal

  • Member
  • Posts: 572
Reply 2 on: Jul 5, 2018
Thanks for the timely response, appreciate it


jordangronback

  • Member
  • Posts: 339
Reply 3 on: Yesterday
:D TYSM

 

Did you know?

Methicillin-resistant Staphylococcus aureus or MRSA was discovered in 1961 in the United Kingdom. It if often referred to as a superbug. MRSA infections cause more deaths in the United States every year than AIDS.

Methicilli ...
Did you know?

Over time, chronic hepatitis B virus and hepatitis C virus infections can progress to advanced liver disease, liver failure, and hepatocellular carcinoma. Unlike other forms, more than 80% of hepatitis C infections become chronic and lead to liver disease. When combined with hepatitis B, hepatitis C now accounts for 75% percent of all cases of liver disease around the world. Liver failure caused by hepatitis C is now leading cause of liver transplants in the United States.

Did you know?

The use of salicylates dates back 2,500 years to Hippocrates’s recommendation of willow bark (from which a salicylate is derived) as an aid to the pains of childbirth. However, overdosage of salicylates can harm body fluids, electrolytes, the CNS, the GI tract, the ears, the lungs, the blood, the liver, and the kidneys and cause coma or death.

Did you know?

More than one-third of adult Americans are obese. Diseases that kill the largest number of people annually, such as heart disease, cancer, diabetes, stroke, and hypertension, can be attributed to diet.

Did you know?

Cyanide works by making the human body unable to use oxygen.

For a complete list of videos, visit our video library