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Carney Products has adopted an ABC costing system. The following manufacturing activities, indirect manufacturing costs, and cost drivers have been identified: (Click the icon to
Carney Products has adopted an ABC costing system. The following manufacturing activities, indirect manufacturing costs, and cost drivers have been identified: (Click the icon to view the activity costs and drivers.) The Job Cost Record for Job #624 revealed that direct materials requisitioned for the job totaled $1,020. The Job Cost Record also showed that direct labor for this job totaled 7 hours at a wage rate of $22 per hour. Other data collected on the resources used by Job #624 included: (Click the icon to view the other data.) Read the requirements. Requirement 1. Calculate the activity cost allocation rate for each of the five pools listed in the table. (Round the allocation rate to the nearest cent. Abbreviations used: DL = direct labor; MH = machine hour.) Activity cost = allocation rate Activity Total estimated MOH costs related to activity 75,000 Total estimated amount of allocation base activity 1,500 setups Machine setup $ 975,000 $ 35,000 Machining Polishing... Quality control Facility-level costs. 6,500 machine hours 7,000 polishing cloths 7,000 tests run $ 560,000 120,000 $ 60,000 DL hours $ 1,765,000 Total manufacturing overhead (MOH). 4 machine setups required 5 machine hours 2 polishing cloths 2 quality control tests run 1. Calculate the activity cost allocation rate for each of the five pools listed in the table. 2. Calculate the total cost of Job #624 (use an ABC costing system). 3. Why would ABC provide a more accurate allocation of manufacturing overhead (MOH) than a plantwide rate? 4. Assume that Carney Products used a traditional costing system rather than an ABC system. Its plantwide MOH rate would have been determined using direct labor (DL) hours as the allocation base. How much cost distortion would have occurred on this job? 9 parts remaining
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