Apply manufacturing overhead to each of several jobs using both a single overhea
ID: 2361942 • Letter: A
Question
Apply manufacturing overhead to each of several jobs using both a single overhead-rate approach and an activity-based-costing approach, and explain the advantages and disadvantages of the latter, as compared to the former. Use the following information to answer the following TWO questions: Acton Company has two products: A and B. The annual production and sales of Product A is 800 units and of Product B is 500 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools--Activity 1, Activity 2, and General Factory--with estimated overhead costs and expected activity as follows: The predetermined overhead rate under the traditional single-rate costing system is closest to: (Points : 5) $ 37.46. $ 21.60. $ 13.17. $ 53.68. The overhead cost per unit of Product B under the traditional costing system is closest to: (Points : 5) $10.74 $7.49 $4.32 $2.63 The amount of Activity 1 cost per unit of Product B under the activity based costing system is closest to: (Points : 5) $24.17 $26.36 $15.82 $29.00Explanation / Answer
Apply manufacturing overhead to each of several jobs using both a single overhead-rate approach and an activity-based-costing approach, and explain the advantages and disadvantages of the latter, as compared to the former. Use the following information to answer the following TWO questions: Acton Company has two products: A and B. The annual production and sales of Product A is 800 units and of Product B is 500 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools--Activity 1, Activity 2, and General Factory--with estimated overhead costs and expected activity as follows:
The predetermined overhead rate under the traditional single-rate costing system is closest to: (Points : 5) $ 37.46.
$ 21.60.
$ 13.17.
$ 53.68.
The overhead cost per unit of Product B under the traditional costing system is closest to: (Points : 5) $10.74
$7.49
$4.32
$2.63
The amount of Activity 1 cost per unit of Product B under the activity based costing system is closest to: (Points : 5)
$24.17
$26.36
$15.82
$29.00
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