Procter & Gamble Co. (P&G) operates multiple manufacturing facilities worldwide. In an effort to better understand and
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Question:
Procter & Gamble Co. (P&G) operates multiple manufacturing facilities worldwide. In an effort to better understand and manage its overhead costs, P&G has implemented activity-based costing (ABC). The company identified two primary activities that drive overhead costs: production setup and quality control.
- Activity 1: Production Setup: P&G incurs setup costs whenever a production line is prepared for a new batch of products. These costs include equipment setup, material handling, and labor.
- Total setup costs: $2,500,000
- Total setup hours: 5,000
- Activity 2: Quality Control: P&G performs rigorous quality control inspections to ensure that its products meet the highest standards. These inspections involve testing samples, conducting audits, and analyzing data.
- Total quality control costs: $3,000,000
- Total inspections conducted: 10,000
Requirements:
- Calculate the overhead cost allocation rate for production setup.
- Determine the overhead cost allocation rate for quality control.
- Allocate the total overhead costs to two product lines, A and B, based on the following usage:
- Product Line A: 2,000 setup hours, 5,000 quality control inspections
- Product Line B: 3,000 setup hours, 5,000 quality control inspections
Related Book For
Introduction To Health Care Management
ISBN: 9781284081015
3rd Edition
Authors: Sharon B. Buchbinder, Nancy H. Shanks
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