Exercise 17-5 (Part Level Submission) Perdon Corporation manufactures safes-larg
ID: 2567787 • Letter: E
Question
Exercise 17-5 (Part Level Submission) 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 Walk-in Safes Units planned for production Material moves per product line Purchase orders per product line Direct labor hours per product line Mobile Safes 200 290 450 810 220 360 1,710 (a) Your answer is correct. Collapse question part The total estimated manufacturing overhead was $273,000. Under traditional costing (which assigns overhead on the basis of direct labor hours), what amount of manufacturing overhead costs are assigned to: (Round answers to 2 decimal places, e.g 12.25.) (1) One mobile safe 438.75 per unit (2) One walk-in safe 4410 per unitExplanation / Answer
Under Activity based costing method, the costs are allocated to each department on the basis of assignment of cost to its corresponding activity. Therefore:
a. Material Handling cost will be assigned on the basis of Material moves per prroduct line
b. Purchasing costs will be assigned on the basis of purchase orders per product line
Type of cost
Basis
Amount per product line
Number per product line
Allocated cost
Material Handling Cost:
Mobiles Safes
Walk in safes
$163,000 / 510
319.6078
319.6078
290
220
92,686
70,314
Purchase Activity cost:
Mobiles Safes
Walk in safes
$110000 / 810
135.8025
135.8025
450
360
61,111
48,889
Purchase activity cost allocated to Mobile Safe = $61,111
Purchase activity cost allocated to Walk In Safe = $48,889
Number of Units of Mobile safe = 200 units
Number of Units of Walk in safe = 42 units
Purchase activity cost of Mobile safe per unit = $61,111 / 200 units = $305.555 per unit
Purchase activity cost of walk in safe per unit = $48,889 / 42 units = $1,164.02381 per unit
Type of cost
Basis
Amount per product line
Number per product line
Allocated cost
Material Handling Cost:
Mobiles Safes
Walk in safes
$163,000 / 510
319.6078
319.6078
290
220
92,686
70,314
Purchase Activity cost:
Mobiles Safes
Walk in safes
$110000 / 810
135.8025
135.8025
450
360
61,111
48,889
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