Exercise 17-1 -Dased oostin and wants to see nowne suits would ditter tris s ste

Question

Exercise 17-1 -Dased oostin and wants to see nowne suits would ditter tris s stem were used. saddle Inc. nas t 01 pos of handbags standard and custo The ntroller has decide d 10 use a lan wide o emead ate based on direct labor costs. The president has near of actM Two activity cost pools were developed: machining and machine setup. Presented below is intomation related to the company's oporations. Standard Custom Direct labor costs Machine hours Setup hours $50,000 1.390 105 5119,000 1,280 380 Total estmated overhead costs are $308,000. Ovenead cost alocated to tne machining actvity cost pool is $197,000, and $109,000 is al ocated to the machine setup activity cost pool. Yur answer is correct Compute the overhead rate using the tradtonal (plantwide) approach (Round answer to 2 decimal places, e.g. 12.25) Predetemined overmead ra0 181.i I % of direct labor cost LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR EXERCISE Your arswer is correct Compute the overhead rates usng the activity-basecosting approach. (Round answers to 2 decimal places, eg. 12.25.) Machining Machine setup 73.78 per machine hour 224.74 per setup hour LINK TO TEXT LINK TO TEXT

Explanation / Answer

Calculation of overhead rate using traditional approach: overhead rate= Total overhead cost/ Total direct labour cost                             = 306000/(50000+119000)=306000/169000=181.07% Predetermined overhead rate is 181.07% of direct labour cost Calculation of overhead rate using activity based costing approach: Machining: Overhead rate= overhead cost/ total machine hours                              =197000/(1390+1280)= 197000/2670=$73.78 Machining= $73.78 per machine hour Machine setup: Overhead rate= overhead cost/ total machine setup hours                              =109000/(105+380)= 109000/485=$224.74 Machine set up= $224.74 per machine setup hour Allocation of overhead costs: Traditional: Standard= 50000*181.07%=$90530 Custom= 119000*181.07%= $215470 Activity based: Standard: Machining= 1390*73.78= 102560 Machine set up= 105*224.74= 23600 Total of standard= 102560+23600= $126160 Custom: Machining= 1280*73.78= 94440 Machine set up= 380*224.74= 85400 Total of custom= 94440+85400= $179840 Difference in allocatiom: standard= 126160-90530= $35630 Custom= 179840-215470= -$35630

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.