Short Answer Question 1 Grand Erie Firm produces and sells a wide variety of products. Two of its most popular products are Whozits and Whatzits. The firm currently uses a traditional job costing system. For many years, the OH application base was direct labour hours. Recently, management made the decision to change to machine hours as the OH application base. Costs of production runs (each with the same number of units) for the two products were compared to assess the new costing system. The cost information using the two different OH application bases follows. Machine hours DM DL OH Job cost Whozits Whatzits 5,460 9,870 3,260 1,677 3,074 $ 10,397 $ 18,884 5,940 DL hours Whozits Whatzits DM 5,460 9,870 DL 3,260 5,940 OH 436 793 Job Cost $ 9,156 $ 16,603 After looking at the information, management was unsure the new costing system was better. In order to get a better idea of which OH application base provides the best results, the same production runs were costed using ABC. Three cost pools were used: machining, direct labour and materials handling. The results follow. ABC DM DL OH Whozits 5,460 3,260 Whatzits 9,870 5,940 After looking at the information, management was unsure if the new costing system was better. In order to get a better idea of which OH application base provides the best results, the same production runs were costed using ABC. Three cost pools were used: machining, direct labour and materials handling. The results follow. Whozits 5,460 3,260 Whatzits 9,870 5,940 ABC DM DL OH Machining DL-related Material handling Total OH Job Cost 737 168 2,042 1,351 305 3,691 2,946.38 11,666 5,346.82 $ 21,157 $ 1. After changing the OH application base from DLH to MH, the apparent cost of both jobs went up. Given that the same total OH is being applied under the two application bases, how can that be explained? Whozits 5,460 3,260 Whatzits 9,870 5,940 ABC DM DL OH Machining DL-related Material handling Total OH Job Cost 737 168 1,351 305 3,691 2,042 2,946.38 11,666 5,346.82 $ 21,157 $ 1. After changing the OH application base from DLH to MH, the apparent cost of both jobs went up. Given that the same total OH is being applied under the two application bases, how can that be explained? 2. The product costs using an ABC system again seem to show that both products cost more than previously assumed. Explain what is causing the increase. Short Answer Question 1 Grand Erie Firm produces and sells a wide variety of products. Two of its most popular products are Whozits and Whatzits. The firm currently uses a traditional job costing system. For many years, the OH application base was direct labour hours. Recently, management made the decision to change to machine hours as the OH application base. Costs of production runs (each with the same number of units) for the two products were compared to assess the new costing system. The cost information using the two different OH application bases follows. Machine hours DM DL OH Job cost Whozits Whatzits 5,460 9,870 3,260 1,677 3,074 $ 10,397 $ 18,884 5,940 DL hours Whozits Whatzits DM 5,460 9,870 DL 3,260 5,940 OH 436 793 Job Cost $ 9,156 $ 16,603 After looking at the information, management was unsure the new costing system was better. In order to get a better idea of which OH application base provides the best results, the same production runs were costed using ABC. Three cost pools were used: machining, direct labour and materials handling. The results follow. ABC DM DL OH Whozits 5,460 3,260 Whatzits 9,870 5,940 After looking at the information, management was unsure if the new costing system was better. In order to get a better idea of which OH application base provides the best results, the same production runs were costed using ABC. Three cost pools were used: machining, direct labour and materials handling. The results follow. Whozits 5,460 3,260 Whatzits 9,870 5,940 ABC DM DL OH Machining DL-related Material handling Total OH Job Cost 737 168 2,042 1,351 305 3,691 2,946.38 11,666 5,346.82 $ 21,157 $ 1. After changing the OH application base from DLH to MH, the apparent cost of both jobs went up. Given that the same total OH is being applied under the two application bases, how can that be explained? Whozits 5,460 3,260 Whatzits 9,870 5,940 ABC DM DL OH Machining DL-related Material handling Total OH Job Cost 737 168 1,351 305 3,691 2,042 2,946.38 11,666 5,346.82 $ 21,157 $ 1. After changing the OH application base from DLH to MH, the apparent cost of both jobs went up. Given that the same total OH is being applied under the two application bases, how can that be explained? 2. The product costs using an ABC system again seem to show that both products cost more than previously assumed. Explain what is causing the increase