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Chaney Products has adopted an ABC costing system. The following manufacturing activities, indirect manufacturing costs, and cost drivers have been identified: Total estimated Total estimated
Chaney Products has adopted an ABC costing system. The following manufacturing activities, indirect manufacturing costs, and cost drivers have been identified:
Total estimated Total estimated amount of MOH costs related to activity Activity allocation base activity $ 2,400 setups 108,000 1,017,500 BA 5,500 machine hours Machine setup Machining Polishing Quality control . . . . . . . . . . . . . . . . . . . . . A 154,000 14,000 polishing cloths A 2,000 tests run A 90,000 120,000 1,489,500 Facility-level costs Total manufacturing overhead (MOH). 40,000 DL hours $ The Job Cost Record for Job #624 revealed that direct materials requisitioned for the job totaled $1,180. The Job Cost Record also showed that direct labor for this job totaled 14 hours at a wage rate of $23 per hour. Other data collected on the resources used by Job #624 included: (Click the icon to view the other data.) Data Table - x 2 machine setups required 3 machine hours 3 polishing cloths 2 quality control tests run Print Done Requirements 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 Chaney 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? Print Done
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