Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Sheep Corporation manufactures two products, Product B and Product A. Product A is of fairly recent origin, having been developed as an attempt to enter

image text in transcribed

Sheep Corporation manufactures two products, Product B and Product A. Product A is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product B. Product A is the more complex of the two products, requiring three hours of direct labour time per unit to manufacture, compared to a hour and a half of direct labour time for Product B. Product A is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct labour hours. The company estimated it would incur $531,340 in manufacturing overhead costs and produce 12,000 units of Product A and 65,000 units of Product B during the current year. Unit cost for materials and direct labour are: Direct materials Direct labour Product B $12 $8 Product A $26 $12 Required: a) Compute the predetermined overhead rate under the current method of allocation, and determine the unit product cost of each product for the current year. b) The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: 900 Activity Cost Pool Machine setups required Purchase orders issued Machine hours required Maintenance requests issued Total Estimated Overhead Cost $243, 240 45, 600 104, 000 138, 500 $531, 340 Expected Activity Product B Product A 1,500 500 100 3, 250 11,000 870 1, 130 Total 2, 400 600 14, 250 2,000 Using the data above and an activity-based costing approach, calculate the pool rates and determine the unit product cost of each product for the current year. c) Explain how ABC improves product cost information, why would they chose to move to an ABC system

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing

Authors: Allan Millichamp, John Taylor

9th Edition

1844809404, 978-1844809400

More Books

Students also viewed these Accounting questions

Question

Explain input design concepts, techniques, and methods

Answered: 1 week ago

Question

How appropriate would it be to conduct additional research?

Answered: 1 week ago

Question

Who are credible sources and opinion leaders for this public?

Answered: 1 week ago

Question

How does or how might your organization affect this public?

Answered: 1 week ago