Exercise 18-5 Mobile Safes Walk-in Safes LINK TO TEXT LINK TO TEXT LINK TO TEXT
ID: 2339057 • Letter: E
Question
Exercise 18-5
Mobile Safes
Walk-in Safes
LINK TO TEXT
LINK TO TEXT
LINK TO TEXT
LINK TO TEXT
LINK TO TEXT
LINK TO TEXT
Traditional Costing
Activity-Based Costing
Exercise 18-5
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
Units planned for production 200 43 Material moves per product line 310 210 Purchase orders per product line 440 350 Direct labor hours per product line 810 1,710Explanation / Answer
The total estimated manufacturing overhead was $268,000. Under traditional costing (which assigns overhead on the basis of direct labor hours), what amount of manufacturing overhead costs are assigned to
manufacturing overhead Rate=268000/(810+1710)=106.35
The total estimated manufacturing overhead of $268,000 was comprised of $171,000 for materials handling costs and $97,000 for purchasing activity costs. Under activity-based costing (ABC): (Round intermediate computations and final answers to 2 decimal places, e.g. 12.25.)
Compare the amount of overhead allocated to one mobile safe and to one walk-in safe under the traditional costing approach versus under ABC
Cost per Unit One mobile safe 430.71 One walk-in safe 4,229.24Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.