Question
Hello! I need assistance with writing a MEMO for the below Accounting Assignment. I have completed the calculation but having a hard time explaining my
Hello! I need assistance with writing a MEMO for the below Accounting Assignment. I have completed the calculation but having a hard time explaining my answers in a MEMO format to the President of the company.
PART 1:
Dachshund, Inc. produces fancy, high end dog kennels and runs. They have two primary units a Single model and a Multi Pet model.You are Dachshunds' controller, and you have decidedto use a plant-wide overhead rate based on direct labor costs.The president of the company recently heard of activity-based costing and wants to see how the results would differ if this system were used.Two activity cost pools were developed:machining and machine setup.Presented below is information related to the company's operations:
Single ModelMulti Pet Model
Direct labor costs$75,000$150,000
Machine hours2,0002,000
Setup hours200800
Total estimated overhead costs are $450,000.Overhead cost allocated to the machining activity cost pool is $270,000 and $180,000 is allocated to the machine setup activity cost pool.
IN EXCEL:
(a)Compute the overhead rate using the traditional (plantwide) approach.
(b)Compute the overhead rates using the activity-based costing approach.
(c)Determine the difference in allocation between the two approaches.
PART 2:
Dachshund, Inc. decided to implement the activity-based costing approach and was successful in its use.However, as the controller you arewondering if instead of only two activity cost pools, they should expand to three activity cost pools based on the following:
Single ModelMulti Pet Model
Direct labor costs$75,000$150,000
Machine hours2,0002,000
Setup hours200800
Packaging hours5075
The estimated overhead of $450,000 is allocated as follows:machining activity cost pool $240,000, machine set up $170,000 and packaging $40,000.
IN EXCEL:
(D) Determine the overhead rates using the activity-based costing approach with three cost pools.
(E) Determine the overhead allocation for the single model and the multi pet model using three activity cost pools.
MEMO: to the president that answer the below:
What is the difference in allocation between two activity cost pools and three activity cost pools?Is the difference in allocation worth using the third activity cost pool?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started