Perdon Corporation manufactures safes Perdon Corporation manufactures safes-larg

Question

Perdon Corporation manufactures safes

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. The total estimated manufacturing overhead was $268,300. 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.) The total estimated manufacturing overhead of $268,300 was comprised of $162,200 for material handling costs and $106,100 for purchasing activity costs. Under activity-based costing (ABC): (Round intermediate calculations and answers to 2 decimal places, e.g. $12.25.) 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.)

Explanation / Answer

The total estimated manufacturing overhead was $268,300. 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

$ 182,781.90

The total estimated manufacturing overhead of $268,300 was comprised of $162,200 for material handling costs and $106,100 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

$ 46,580.40

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

$

$ 2,330.98

(1)

One mobile safe

$

(2)

One walk-in safe

$ 182,781.90

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