Carlise Corp., which manufactures ceiling fans, currently has two product lines, the Indoor and the Outdoor. Carlise has total overhead of $139,400.
Carlise has identified the following information about its overhead activity cost pools and the two product lines:

Required:
1. Suppose Carlise used a traditional costing system with machine hours as the cost driver.
Determine the amount of overhead assigned to each product line.
2. Calculate the activity proportions for each cost pool in Carlise€™s ABC system.
3. Calculate the amount of overhead that Carlise will assign to the Indoor line if it uses an ABC system.
4. Determine the amount of overhead Carlise will assign to the Outdoor line if it uses an ABC system.
5. Compare the results for a traditional system with an ABC system. Which do you think is more accurate andwhy?

Transcribed Image Text:

Cost Assigned to Pool Quantity/Amount Quantity/Amount Activity Consumed by Consumed by Cost Pools Materials handling Quality control Machine Cost Driver $20,000 $82,500 $36,900 Indoor Line 575 moves 6,000 inspections 21,000 machine Outdoor Line 425 moves 4,000 inspections 20,000 machine Number of moves Number of inspections Number of maintenance machine hours hours hours