Perdon Corporation manufactures safes—large mobile safes, and large walk-in stat
ID: 2417013 • Letter: P
Question
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.
Q1.The total estimated manufacturing overhead was $268,500. Under traditional costing (which assigns overhead on the basis of direct labor hours), what amount of manufacturing overhead costs are assigned to: (Round intermediate calculations and answers to 2 decimal places, e.g. $12.25.)
(1). One mobile safe $
(2).One walk-in safe $
Q2.The total estimated manufacturing overhead of $268,500 was comprised of $168,800 for material handling costs and $99,700 for purchasing activity costs. Under activity-based costing (ABC): (Round intermediate calculations and answers to 2 decimal places, e.g. $12.25.)
(1).What amount of material handling costs are assigned to:
(a).One mobile safe $
(b).One walk-in safe $
(2).What amount of purchasing activity costs are assigned to:
(a).One mobile safe $
(b).One walk-in safe $
Q3.Compare the amount of overhead allocated to one mobile safe and to one walk-in safe under the traditional costing approach versus under ABC. (Round answers to 2 decimal places, e.g. $12.25.)
Traditional costing Activity-based costing
mobile safe $ $
walk-in safe $ $
!!!!plaese see your fomula!!!!
Mobile Safes Walk-in Safes
Units planned for production 190 50
Material moves per product line 300 270
Purchase orders per product line 450 350
Direct labor hours per product line 810 1,710
Explanation / Answer
Q1:
Determine the amount of manufacturing overhead costs is assigned to One mobile safe and One walk in safe:
Products
One mobile safe
One walk-in safe
Total
Estimated Manufacturing overhead
$ 268,500.00
Total direct labor hours
810
1710
2520
Manufacturing overhead per direct labor hour
$ 106.55
Estimated Manufacturing overhead
(Allocated based on direct labor hours used)
$ 86,303.57
$ 182,196.43
$ 268,500.00
(1). One mobile safe $ 86,303.57
(2).One walk-in safe $ 182,196.43
Q. 2
(1).Determine the amount of material handling costs are assigned to (a).One mobile safe $ (b).One walk-in safe $:
Products
One mobile safe
One walk-in safe
Total
Material handling cost
$ 168,800.00
Material moves per product line
300
270
570
Material handling cost per product line
$ 296.14
Estimated Manufacturing overhead
$ 88,842.11
$ 79,957.89
$ 168,800.00
(a).One mobile safe $ 88,842.11
(b).One walk-in safe $ 79,957.89
(2).Determine the amount of purchasing activity costs are assigned to (a).One mobile safe (b).One walk-in safe:
Products
One mobile safe
One walk-in safe
Total
Purchasing activity cost
$ 99,700.00
Purchase orders per product line
450
350
800
Purchasing order cost per product line
$ 124.63
Estimated Manufacturing overhead
$ 56,081.25
$ 43,618.75
$ 99,700.00
(a).One mobile safe $ 56,081.25
(b).One walk-in safe $ 43,618.75
Q3.Compare the amount of overhead allocated to one mobile safe and to one walk-in safe under the traditional costing approach versus under ABC:
Activity-based costing
Traditional costing
Material handling
cost
Purchasing activity
costs
mobile safe
$86,303.57
$88,842.11
$56,081.25
$144,923.36
walk-in safe
$182,196.43
79,957.89
$43,618.75
$123,576.64
Products
One mobile safe
One walk-in safe
Total
Estimated Manufacturing overhead
$ 268,500.00
Total direct labor hours
810
1710
2520
Manufacturing overhead per direct labor hour
$ 106.55
Estimated Manufacturing overhead
(Allocated based on direct labor hours used)
$ 86,303.57
$ 182,196.43
$ 268,500.00
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