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 121 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
YES! Correct, THANKS for helping me on my review


TheDev123

  • Member
  • Posts: 332
Reply 3 on: Yesterday
Wow, this really help

 

Did you know?

According to the Migraine Research Foundation, migraines are the third most prevalent illness in the world. Women are most affected (18%), followed by children of both sexes (10%), and men (6%).

Did you know?

Interferon was scarce and expensive until 1980, when the interferon gene was inserted into bacteria using recombinant DNA technology, allowing for mass cultivation and purification from bacterial cultures.

Did you know?

As the western states of America were settled, pioneers often had to drink rancid water from ponds and other sources. This often resulted in chronic diarrhea, causing many cases of dehydration and death that could have been avoided if clean water had been available.

Did you know?

The term bacteria was devised in the 19th century by German biologist Ferdinand Cohn. He based it on the Greek word "bakterion" meaning a small rod or staff. Cohn is considered to be the father of modern bacteriology.

Did you know?

If you use artificial sweeteners, such as cyclamates, your eyes may be more sensitive to light. Other factors that will make your eyes more sensitive to light include use of antibiotics, oral contraceptives, hypertension medications, diuretics, and antidiabetic medications.

For a complete list of videos, visit our video library