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Joker Construction currently uses traditional costing where overhead is applied based on direct labor hours. Using traditional costing, the applied overhead rate is P20
Joker Construction currently uses traditional costing where overhead is applied based on direct labor hours. Using traditional costing, the applied overhead rate is P20 per direct labor hour. They are considering a switch to activity-based costing (ABC). The company controller has come up with preliminary overhead rates for each of the following activities: Activity Material delivery and handling Inspections Supervision Purchasing Allocation Base Number of deliveries Number of inspections Hours of supervisor time Overhead rate P100 per delivery P75 per inspection P30 per supervisor hour Number of purchase orders P60 per purchase order One of the company's current jobs has the following information available Direct labor hours Number of deliveries 50 hours Number of inspections Hours of supervisor time Number of purchase orders Which of the following statements is true when comparing the total overhead allocated to the job using traditional versus ABC costing? ABC costing will yield P215 less in overhead cost being allocated to the job. ABC costing will yield P735 less in overhead cost being allocated to the job. ABC costing will yield P545 more in overhead cost being allocated to the job. ABC costing will yield P785 more in overhead cost being allocated to the job.
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