Question
Can you help me for question, thank you? Wellington Company manufactures custom-designed pens. Previously, the company has been using a traditional overhead allocation system based
Can you help me for question, thank you?
Wellington Company manufactures custom-designed pens. Previously, the company has been using a traditional overhead allocation system based solely on direct labuor-hours. However, the company's top management thought that the traditional overhead allocation system was distorting costs and selling prices. Hence, it has decided to switch to an activity-based costing system using. The company provides the following information:
Activity cost pool Total cost Total activity Labour related $30,000 10,000 direct labour hours Machine related $40,000 8,000 machine hours Quality control $10,000 1,000 inspections Others $32,000 N/A The company has recently completed a job (Job #24) that required producing 1,000 pens. It incurred $1,200 direct material, 20 hours of direct labour at $50 per hour, 120 machine hours, and 7 inspections to complete the job. Required (show your calculations): a. Make a report showing the cost of Job #24 using the activity-based costing system. b. Do you think that the cost of the Job #24 is higher in the activity-based costing system than the traditional costing system? Explain your answers.
Activity cost pool Total cost Total activity Labour related $30,000 10,000 direct labour hours Machine related $40,000 8,000 machine hours Quality control $10,000 1,000 inspections Others l $32,000 N/AStep by Step Solution
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