PA4-2 Assigning Costs Using Traditional System, Assigning Costs Using Activity Proportions [LO 4-1, 4-3, 4-5, 4-6]

Carlise Corp., which manufactures ceiling fans, currently has two product lines, the Indoor and the Outdoor. Carlise has total overhead of $139,400. Carlise has identified the following information about its overhead activity cost pools and the two product lines:

Activity Cost Pools	Cost Driver	Cost Assigned to Pool				Quantity/Amount Consumed by Indoor Line	Quantity/Amount Consumed by Outdoor Line
Materials handling	Number of moves		$	20,000		575 moves	425 moves
Quality control	Number of inspections		$	82,500		6,000 inspections	4,000 inspections
Machine maintenance	Number of machine hours		$	36,900		21,000 machine hours	20,000 machine hours

Required: 1. Suppose Carlise used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.)

2. Calculate the activity proportions for each cost pool in Carlises ABC system. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

3. Calculate the amount of overhead that Carlise will assign to the Indoor line if it uses an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.)

4. Determine the amount of overhead Carlise will assign to the Outdoor line if it uses an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.)

5. Compare the results for a traditional system with an ABC system. Which do you think is more accurate?

	ABC System
	Traditional System