Traditional Product Costing Versus Activity-Based Costing High Country Outfitter
ID: 2535799 • Letter: T
Question
Traditional Product Costing Versus Activity-Based Costing
High Country Outfitters, Inc., makes backpacks for large sporting goods chains that are sold under the customers' store brand names. The accounting department has identified the following overhead costs and cost drivers for next year:
Cost Driver
$1,216,800
Number of setups
312,000
Number of orders
1,200,000
120,000
Number of kilowatt hours
Total predicted direct labor hours for next year is 60,000. The following data are for two recently completed jobs:
a. Determine the unit cost for each job using a traditional company-wide overhead rate based on direct labor hours.
Round rate to two decimal places.
Overhead rate per direct labor hour $Answer
Use rounded overhead rate calculated above for calculations below. Round cost answers to the nearest whole number, when needed. Round cost per unit to two decimal places, if needed.
b. Determine the unit cost for each job using ABC. Activity-based overhead rates:
Round cost answers to the nearest whole number, when needed.
Round cost per unit to two decimal places, if needed.
$Answer
$Answer
$Answer
Overhead Item Expected CostsCost Driver
Maximum Quantity Setup costs$1,216,800
Number of setups
7,200 Ordering costs312,000
Number of orders
60,000 Maintenance1,200,000
Number of machine hours 80,000 Power120,000
Number of kilowatt hours
600,000Explanation / Answer
a. Overhead rate per direct labor hour = Total expected costs/Estimated direct labor hours = $2848800/60000 = $47.48 per direct labor hour.
b.
Working:
Job 201 Job 202 Direct materials 15000 16500 Direct labor 20625 72750 Overhead 12820 15668 (270 x 47.48) (330 x 47.48) Total job cost 48445 104918 Units 1125 915 Per unit cost 43.06 114.66Related Questions
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