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Carter, Incorporated, produces two products, Product A and Product B. Carter uses a traditional volume-based costing system in which direct labor hours are the allocation
Carter, Incorporated, produces two products, Product A and Product B. Carter uses a traditional volume-based costing system in which direct labor hours are the allocation base. Carter is considering switching to an ABC system by splitting its manufacturing overhead cost of $908,000 across three activities: Design, Production, and Inspection. Under the traditional volume-based costing system, the predetermined overhead rate is $2.27 per direct labor hour. Under the ABC system, the rate for each activity and usage of the cost drivers are as follows: Required: a. Calculate the indirect manufacturing costs assigned to Product A under the traditional costing system. b. Calculate the indirect manufacturing costs assigned to Product B under the traditional costing system. c. Calculate the indirect manufacturing costs assigned to Product A under the ABC system. d. Calculate the indirect manufacturing costs assigned to Product B under the ABC system. e. Which product is undercosted and which is overcosted under the volume-based costing system compared to ABC? Complete this question by entering your answers in the tabs below. Calculate the indirect manufacturing costs assigned to Product A under the traditional costing system. Calculate the indirect manufacturing costs assigned to Product B under the traditional costing system. Calculate the indirect manufacturing costs assigned to Product A under the ABC system. Calculate the indirect manufacturing costs assigned to Product B under the ABC system. Which product is undercosted and which is overcosted under the volume-based costing system compared to ABC
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