ezto.mheducation.c Carter, Inc. produces two different products, Product A and P
ID: 2426519 • Letter: E
Question
ezto.mheducation.c Carter, Inc. produces two different products, Product A and Product B.Cartor uses a traditional volume- based costing system in which direct labor hours are the allocation base. Carter is considering switching to an ABC system by splitting its manufacturing overhead cost of $1,220,000 across three activities: Design, Production, and Inspection. Under the traditional volume-based costing system, the predetermined overhead rate is $2.44/direct labor hour. Under the ABC system, the rate for each activity and usage of the activity drivers are as follows: sage Design (Engineering Hours) $700/hour Production (Diredt Labor Hours) $1.00hour100,000 Inspection (Batches) 400 400,000 100 200 $600/batch 400 Required: a. Calculate the indirect manufacturing costs assigned to Product A under the traditional costing system b. Calculate the indirect manufacturing costs assigned to Product B under the traditional costing system. c. Calculate the indirect manufacturing costs assigned to Product A under the ABC systen.Explanation / Answer
a predetemined overhead = indirect manufacturing cost of A / direct labour hour of A
$2.44 = indirect manufacturing cost of A / 100000
indirect manufacturing cost of A = $244000
b predetemined overhead = indirect manufacturing cost of B / direct labour hour of B
$2.44 = indirect manufacturing cost of B / 400000
indirect manufacturing cost of B = $976000
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