Use the following to answer questions 27-28: Orange, Inc. has identified the fol
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Use the following to answer questions 27-28: Orange, Inc. has identified the following cost drivers for its expected overhead costs for the year: Total direct labor hours budgeted = 2,400 hours. The following data applies to one of the products completed during the year:
Total direct labor hours budgeted = 2,400 hours.
The following data applies to one of the products completed during the year:
If direct labor hours are used on a traditional costing system to assign overhead, the total overhead cost for Product X will be ________?
If the activity-based cost drivers are used to allocate overhead cost, the total overhead cost of Product X will be ________?
Setrp Ordring Mainnnre Power 40,000 Number ofsetups 20000 Namber ofonrs 50000 Marhinehours 10,00 Kilowatt hours 200 1,00I 5,000 10 000Explanation / Answer
Overhead Cost Basis AB Costing: A Traditional Costing: Overhead Costs: A B A/B Product X Cost Pools Budgeted Cost Cost Driver Cost Driver Level Cost Per Activity Overhead Cost 2000 Setup Cost 40000 No of Setup 200 200.00 (40 DLH*50) Ordering 20000 No of Ordering 1000 20.00 Total Overhead Cost 2000 Maintainance 50000 MH 5000 10.00 Units 100 Power 10000 KW H 10000 1.00 Cost PU 20.00 120000 Overhead Cost Basis DLH: B Activity Based Costing: Overhead Costs: A Overhead Costs: Activity Cost Per Activity Total OH Cost Cost Pools Budgeted Cost Cost Pools Setup Cost 40000 Setup Cost 4 200.00 800 Ordering 20000 Ordering 8 20.00 160 Maintainance 50000 Maintainance 50 10.00 500 Power 10000 Power 100 1.00 100 120000 Total OH Cost 1560 Total DLH 2400 Units 100 Overhead Per DLH 50.00 Cost PU 15.60
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