Wilkins Inc. has two types of handbags: standard and custom. The controller has
ID: 2452548 • Letter: W
Question
Wilkins Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company’s operations.
Standard
Custom
Total estimated overhead costs are $298,600. Overhead cost allocated to the machining activity cost pool is $198,900, and $99,700 is allocated to the machine setup activity cost pool.
Determine the difference in allocation between the two approaches. (Round answers to 0 decimal places, e.g. $1,225.)
Standard
Custom
Direct labor costs $55,200 $117,000 Machine hours 1,340 1,370 Setup hours 98 420Explanation / Answer
Statement showing difference in allocation
Working notes:
1.Traditional Costing approach
Statement of cost
2. Activity based costing approach
Statement of cost pool
Statement of cost
Particulars Standard Custom Traditional approach $150919 $319881 Activity based costing approach $172411 $298389Related Questions
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