Please answer and explain part B Sherdan Publishing ldentfied the followlng over
ID: 2541766 • Letter: P
Question
Please answer and explain part B
Sherdan Publishing ldentfied the followlng overhead activitles, thelr respective costs, and thelr cost drivers to produce the three types of textbooks the company publishes. Type of Textbook Activity (Cost) Machine maintenance ($428,888) Setups ($798,888) Packing ($198,808) Photo development ($448,623) Cost Driver Deluxe Moderate Economy 908 18 40 1,588 Nunber of nachine hours 1,200 Number of setups Nunber of cartons 18 3,588 60 500 Nunber of pictures Deluxe textbooks are made with the finest-quality paper, slx-color printing, and many photographs. Moderate texts are made with three colors and a few photographs spread throughout each chapter. Economy books are printed In black and whlte and Include pictures only In chapter openings. Required a. Sheridan currently allocates all overhead costs based on machlne hours. The company produced the following number of books during the prior year: 6e,88e 188,800 248,800 Determine the overhead cost per book for each book type. b. Determine the overhead cost per book, assuming that the volume-based allocation system described In Requlrement a is replacecd with an activity-based costing system. (For all requirements, round your answers to 2 declmal places.) 3 Answer is not complete. Deluxe Moderate Cost per book (volume-based allocation 3.85 )$ 3.8501$ 3.850 b. Cost per book (activity-based costing)Explanation / Answer
Answer a. Predetermined Overhead Rate = $1,848,000 (Total Overhead) / 2,400 Mach Hrs Predetermined Overhead Rate = $770 per mch hrs Deluxe Moderate Economy Overhead applied 231,000 693,000 924,000 No. of Books 60,000 180,000 240000 Overhead Cost per Book 3.85 3.85 3.85 Answer b. ABC Costing Activity Overhead Cost Driver Quantity Allocation Rate Indirect Costs Machine Maintenance 420,000 2,400 mach hrs 175.00 per mach hrs Setups 790,000 50 setups 15,800.00 per setups Packing 198,000 110 cartons 1,800.00 per cartons Photo Development 440,000 5,500 pictures 80.00 per pictures Total 1,848,000 Assigning Overhead Cost to Product Model Using ABC Method Activity Based Overhead Rate Deluxe Moderate Economy Cost Driver Incurred OH Allocated Cost Driver Incurred OH Allocated Cost Driver Incurred OH Allocated Machine Maintenance 175.00 per mach hrs 300 mach hrs 52,500.00 900 mach hrs 157,500.00 1,200 mach hrs 210,000 Setups 15,800.00 per setups 35 setups 553,000.00 10 setups 158,000.00 5 setups 79,000 Packing 1,800.00 per cartons 10 cartons 18,000.00 40 cartons 72,000.00 60 cartons 108,000 Photo Development 80.00 per pictures 3,500 pictures 280,000.00 1,500 pictures 120,000.00 500 pictures 40,000 Total Overhead 903,500 507,500 437,000 No. Of Books 60,000 180,000 240,000 Overhead per Book 15.06 2.82 1.82 Overhead Cost per Book Deluxe Moderate Economy Volume Based Accounting 3.85 3.85 3.85 Activity Based Accounting 15.06 2.82 1.82