Long Ave Inc. manufactures two products Standard and Deluxe. Manufacturing overh
ID: 2497542 • Letter: L
Question
Long Ave Inc. manufactures two products Standard and Deluxe. Manufacturing overhead costs consist of: Information on the two products is as follows: Currently, the controller uses a plant-wide overhead rate based on direct labor hours t assign overhead to the Standard and Deluxe products. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Required: Assign the total manufacturing plant-wide method. Assign the total manufacturing costing (ABC).Explanation / Answer
As per current system of DIRECT LABOUR HR ALLOCATION Products COST DRIVER Standard Deluxe Total Cost Desired ratio=350:140 Setting of Mac $ 178,571 $ 71,429 $ 250,000 0.714286 0.285714 Mac. Fabrication $ 389,286 $ 155,714 $ 545,000 Inspecting $ 339,286 $ 135,714 $ 475,000 Shipping $ 539,286 $ 215,714 $ 755,000 Purchasing $ 228,571 $ 91,429 $ 320,000 TOTAL $ 1,675,000 $ 670,000 As per ABC ALLOCATION RATIO DISTRIBUTION COST DRIVER Standard Deluxe TOTAL Setting of Mac 270 450 720 Mac. Fabrication 33500 45000 78500 Inspecting 450 270 720 Shipping 6200 8750 14950 Purchasing 395 290 685 COST ALLOCATION COST DRIVER Standard Deluxe Total Cost Setting of Mac $ 93,750 $ 156,250 $ 250,000 Mac. Fabrication $ 232,580 $ 312,420 $ 545,000 Inspecting $ 296,875 $ 178,125 $ 475,000 Shipping $ 313,110 $ 441,890 $ 755,000 Purchasing $ 184,526 $ 135,474 $ 320,000 $ 1,120,841 $ 1,224,159
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