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Comwell Products has adopted an ABC costing system. The following manufacturing activities, indirect manufacturing costs, and cost drivers have been identified The Job Cost
Comwell Products has adopted an ABC costing system. The following manufacturing activities, indirect manufacturing costs, and cost drivers have been identified The Job Cost Record for Job #804 revealed that direct materials requisitioned for the job totaled $1,250. The Job Cost Record also showed that direct labor for this job totaled 12 hours at a wage rate of $30 per hour. Activity Machine setup Total estimated MOH costs related to activity $180,000 Total estimated amount of allocation base activity 2,000 setups Machining Polishing Quality control Facility-level costs Total manufacturing overhead (MOH) Other data collected on the resources used by Job #804 included: . 1 machine setup required 6 machine hours $1,050,000 12,000 machine hours $100,000 5,000 polishing cloths $320,000 4,000 tests run. $150.000 50,000 DL hours. $1,800,000 4 polishing cloths 3 quality control tests run Requirements 1. Calculate the activity cost allocation rate for cach of the five pools listed in the table. 2. Calculate the total cost of Job #804 (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 Cornwell 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?
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