Perdon Corporation manufactures safes—large mobile safes, and large walk-in stat
ID: 2336166 • Letter: P
Question
Perdon Corporation manufactures safes—large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The information shown below relates to overhead.
Mobile Safes
Walk-in Safes
B. Compare the amount of overhead allocated to one mobile sale and to one walk in safe under the tradional costing approach versus under ABC
Traditional Costing ABC
Mobile Safe $ $
Walk in
C. The total estimated manufacturing overhead of $260,000 was comprised of $160,000 for materials handling costs and $100,000 for purchasing activity cost under ABC what amount of costing are assigned to?
one mobile safe $ per unit
one walk in $ per unit
Mobile Safes
Walk-in Safes
Units planned for production 200 50 Material moves per product line 300 200 Purchase orders per product line 450 350 Direct labor hours per product line 800 1,700Explanation / Answer
B. The Amount of Total Manufacturing overhead allocated to one mobile sale and to one walk in safe under the traditional costing approach
Total Manufacturing overhead assigned to Mobile Safes
Total Manufacturing overhead* Direct labour hours of Mobile Safes
Direct labour hours of both Mobile safes and Walk in safe
=$260000*800/800+1700=$83200
Assigned to One Mobile Safe=$83200/200=416
Total Manufacturing overhead assigned to walk in safe
Total Manufacturing overhead* Direct labour hours of walk in Safe
Direct labour hours of both Mobile safes and Walk in safe
=$260000*1700/800+1700=$176800
Assigned to One walk Safe=$176800/50=3536
The Amount of Total Manufacturing overhead allocated to one mobile sale and to one walk in safe under the Activity costing approach
Manufacturing Overhead
Mobile Safe
Walk-in Safe
1) Material Handling Cost = 160000
160000 * 300 / 300+200 = 96000
160000 * 200 / 300+200 =64000
2) Purchasing activity Cost =100000
100000 * 450 / 450+350 = 56250
100000 * 350 / 450+350 = 43750
Total manufacturing Overhead assigned (1+2)
152250
107750
Manufacturing overhead per unit
152250 / 200 = $761.25
107750 / 50 = $2155
C. Amount of costing are assigned to one mobile safe $ per unit and one walk in $ per unit
Traditional Costing
Actvity-based Costing
Mobile Safe
$ 416
$ 761.25
Walk-in Safe
$ 3536
$ 2155
Manufacturing Overhead
Mobile Safe
Walk-in Safe
1) Material Handling Cost = 160000
160000 * 300 / 300+200 = 96000
160000 * 200 / 300+200 =64000
2) Purchasing activity Cost =100000
100000 * 450 / 450+350 = 56250
100000 * 350 / 450+350 = 43750
Total manufacturing Overhead assigned (1+2)
152250
107750
Manufacturing overhead per unit
152250 / 200 = $761.25
107750 / 50 = $2155
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