Waring Corporation manufactures safes—large mobile safes, and large walk-in sta- tionary bank safes. As part of its annual budgeting process, Waring is analyzing the profitability of its two products. Part of this analysis involves estimating the amount of over- head to be allocated to each product line. The following information relates to overhead.

Instructions

(a) The total estimated manufacturing overhead was $237,000. Under traditional costing (which assigns overhead on the basis of direct-labor hours), what amount of manufacturing overhead costs are assigned to (do not round): (1) One mobile safe? (2) One walk-in safe?

(b) The total estimated manufacturing overhead of $237,000 was comprised of $150,000 for material-handling costs and $87,000 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? (h) 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 ABC.

Transcribed Image Text:

Mobile Walk-in Safes Safes Units planned for production Material moves per product line 200 50 300 200 Purchase orders per product line 450 350 Direct labor hours per product line 700 1,700