Exercise 5-7A Comparing an ABC system with a traditional costing system LO 5-1,

Question

Exercise 5-7A Comparing an ABC system with a traditional costing system LO 5-1, 5-3 Snowden Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows: total Programming cost Soft Product testing Total overhead cost 120,500 Number of progranning hours 18,000 Number of inspections 22,000 Number of tests $264,000 Expected activity for each product follows: Number of Number of Programming Number of Sumber of 13,500 31,500 1,000 Hours 1,500 ,120 880 48 200 Total 45,000 2,500 2,000 Assume that before shifting to activity-based costing, Snowden Industries allocated all overhead costs based on direct labor hours Direct labor data pertaining to the two decoders follow Direct !L

Explanation / Answer

1) When using direct labor hours overhead rate = estimated moh/estimated direct labor hours 264,000/24000 11 overhead allocated = overhead rate * direct labor hours of respective product DecoderP Decoder Q Direct labor hours 7,200 16,800 overhead rate 11 11 overhead allocated 79200 184800 units produced 13,500 31,500 overhead unit cost 5.87 5.87 answer answer to A. B allocated cost cost per unit Decoder P 79200 5.87 Decoder Q 184800 5.87

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---