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Author Question: Nichols Inc. manufactures remote controls. Currently the company uses a plant-wide rate for ... (Read 49 times)

ec501234

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Nichols Inc. manufactures remote controls. Currently the company uses a plant-wide rate for allocating manufacturing overhead. The plant manager is considering switching-over to ABC costing system and has asked the accounting department to identify the primary production activities and their cost drivers which are as follows:

ActivitiesCost driverAllocation Rate
Material handlingNumber of parts$1 per part
AssemblyLabor hours$20 per hour
InspectionTime at inspection station$10 per minute

The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of $30 per labor hour.

Nichols' management is considering to implement ABC system because ________.
◦ ABC system can be implemented cheaply
◦ ABC system provides more accurate direct cost figures
◦ ABC system is a highly refined costing system
◦ ABC system requires minimal expertise to operate


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Marked as best answer by ec501234 on Mar 6, 2021

kbennett34

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ec501234

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Reply 2 on: Mar 6, 2021
Thanks for the timely response, appreciate it


shailee

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Reply 3 on: Yesterday
Great answer, keep it coming :)

 

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