Question
A company uses activity-based costing and has identified the following activities: Activity Cost Pool Cost Driver Total Cost Driver Quantity Setup $10,000 Number of setups
A company uses activity-based costing and has identified the following activities:
Activity | Cost Pool | Cost Driver | Total Cost | Driver Quantity |
Setup | $10,000 | Number of setups | $40,000 | 200 |
Machining | $20,000 | Machine hours | $80,000 | 2,000 |
Quality control | $15,000 | Inspection hours | $60,000 | 1,000 |
(a) Calculate the cost driver rate for each activity. (b) Determine the total overhead cost allocated to a product with 10 setups, 500 machine hours, and 100 inspection hours. (c) Prepare the journal entries for overhead allocation. (d) Discuss the benefits of activity-based costing over traditional costing methods.
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Accounting Tools for Business Decision Making
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
6th edition
1118096894, 978-1-11921511, 978-1118096895
