E4- 6B Price Corporation manufactures safes-large mobile safes, and large walk-i
ID: 2545064 • Letter: E
Question
E4- 6B Price Corporation manufactures safes-large mobile safes, and large walk-in Assi overh stationary bank safes. As part of its annual budgeting process, Price is analyzing the traditional o ofitabilty of its two products. Part of this analysis involves estimating the amount (0 1,5) of overhead to be allocated to cach product line. The following information relates to overhead. Units planned for production Material moves per product line Purchase orders per product line Direct labor hours per product line Mobile Safes 200 400 490 700 Walk-in Safes 50 200 350 1,800 Instructions (a) The total estimated manufacturing overhead was $204,000. Under traditional cost ing (which assigns overhead on the basis of direct-labor hours), what amount of man- ufacturing overhead costs are assigned to: (1) One mobile safe? (2) One walk-in safe? (b) The total estimated manufacturing overhead of $204,000 was comprised of $120,000 tor material-handling costs and $84,000 for purchasing activity costs. Under activity- based costing (ABC) (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? (c) Compare the amount of overhead allocated to one mobile safe and to one walk-in safe under the traditional costing approach versus under ABO.Explanation / Answer
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b&c
a Estimated Overhread 204000 Total Direct Labor Hour 700+1800 2500 Overhead allocation Rate Estimated Overhead/Total Direct Labor Hour 81.6 Allocation: Direct Labor Hour Rate Overhead Allcoated On Mobile safe 700 81.6 57120 Walk-in Safe 1800 81.6 146880Related Questions
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