Exercise 18-10 Kragan Clothing Company manufactures its own designed and labeled

Question

Exercise 18-10 Kragan Clothing Company manufactures its own designed and labeled athletic wear and sells its products through catalog sales and retail outlets. While Kragan has for years used activity-based costing in its manufacturing activities, it has always used tr assigned to Kragan' $408,000. The company has decided to extend activity-based costing to its selling costs. Data relat al costing in assigning its selling costs to its product lines. Selling costs have traditionally been th of March for Kragan's "high-intensity" line of athletic wear are e of products for the month of March are as follows. s product lines at a rate of 70% of direct materials costs. Its direct m aterials costs for the mon Overhead Number of Cost Drivers Cost Drivers Minutes Catalogs mailed Activity Cost Pools Sales commissions $0.05 per dollar sales $300 per minute $922,000 $10 per column inch $2.50 per catalog Advertising-InternetColumn inches Catalogs Cost of catalog sales Catalog orders Credit and collection Dolar sales 1,900 58,300 9,300 922,000 $0.03 per dollar sales Compute the selling costs to be assigned to the "high-intensity" line of athletic wear for the month the cost driver), and (2) using activity-based costing of March (1) using the traditional product costing system (direct materials cost is Traditional product costing Activity based costing Selling cost to be assigned

Explanation / Answer

1.

2.

Traditional product costing system undercost the high density product line by $52,210

Selling cost - traditional product costing Direct material    408,000 Selling cost at 70% of direct material    285,600

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