Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Request Answer for the question attached herewith, Kragan Clothing Company manufactures its own designed and labeled sports attire and sells its products through catalog sales
Request Answer for the question attached herewith,
Kragan Clothing Company manufactures its own designed and labeled sports attire and sells its products through catalog sales and retail outlets. While Kragan has for years used activity-based costing in its manufacturing activities, it has always used traditional costing in assigning its selling costs to its product lines. Selling costs have traditionally been assigned to Kragan's product lines at a rate of 70% of direct material costs. Its direct material costs for the month of March for Kragan's \"high intensity\" line of attire are $410,000. The company has decided to extend activity-based costing to its selling costs. Data relating to the \"high intensity\" line of products for the month of March are as follows. Activity Cost Pools Overhead Rate Cost Drivers Sales commissions Dollar sales AdvertisingTV/Radio Minutes Advertising Newspaper Column inches Catalogs Catalogs mailed Cost of catalog sales Catalog orders Credit and collection Dollar sales $0.05 Number of Cost Drivers Used per Activity per dollar sales $925,000 $300 per minute 260 $10 per column inch 2,000 $2.50 per catalog 59,000 $1 per catalog order 9,150 $0.03 per dollar sales $925,000 (a) Compute the selling costs to be assigned to the \"high-intensity\" line of attire for the month of March: (1) using the traditional product costing system (direct material cost is the cost driver), and (2) using activity-based costing. Traditional product costing Activity-based costing Selling cost to be assigned (b) By what amount does the traditional product costing system undercost or overcost the \"high-intensity\" product lineStep 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