Company X produces dining chairs and tables. The following budget information is
ID: 2545075 • Letter: C
Question
Company X produces dining chairs and tables. The following budget information is available: TablesTotal Cost Item Dining Chairs Machine Setups Inspections Labor Hours 250 600 TL48,400 250 2,400 420 TL72,000 2430 (a) Compute total machine setups and inspection costs assigned to each product, usingplantwide method if the allocation base is labor hours. (b) Compute total machine setups and inspection costs assigned to each product, using ABC (c) Should Company X use plantwide or ABC method? Why? Explain.Explanation / Answer
Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount a) Total Labour hours = 2400 + 2430 4,830.00 Total cost=48400 + 72000 120,400.00 Plantwide overhead rate = 120400/4830 24.93 b) Particulars Amount a Activity Driver No of Activity b Cost per activity c= a/b No of Activity of chairs d Cost Allocated to chairs c*d No of Activity of table e Cost Allocated to table c*e Machine setups 48,400.00 Setups 850.00 56.94 250.00 14,235.29 600.00 34,164.71 Inspection 72,000.00 Inspection 670.00 107.46 250.00 26,865.67 420.00 45,134.33 Total Overhead 120,400.00 41,100.97 79,299.03 c) Company should use ABC. Activity based costing forces the manager to investigate fixed costs very closely. It therefore helps management to identify areas of inefficiency as well as recognize costs which we could have been conceived fixed but, which are in fact, variable or semi-variable to specific products.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.