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Activity Based Costing - a comparison of traditional and activity based costing. Whittier Wood Furniture is a medium large factory offering all-wood furniture. Their facility
Activity Based Costing - a comparison of traditional and activity based costing. Whittier Wood Furniture is a medium large factory offering all-wood furniture. Their facility is divided in two manufacturing departments: machining and assembly departments. They want to refine their costing system for the three chair models (A, B,C)that they produce. The company has budgeted the following information for the coming period. They have accumulated overhead cost data for the two departments as: Machining department at $1.20 per machine hour Assembly department at $0,825 per direct labor hour To improve their costing, they have reanalyzed the overheads into cost pools defined by activities as follows: For the production plan of the period by chair model you have obtained estimates of activities: Required: Prepare and present profit statements using: Conventional (absorption) costing, and Activity based costing. Comment on why activity based costing is considered to present a fairer valuation of the product cost per unit
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