Question
Sunland, Inc. produces two types of gas grills: a family model and a deluxe model. Sunlands controller has decided to use a plantwide overhead rate
Sunland, Inc. produces two types of gas grills: a family model and a deluxe model. Sunlands controller has decided to use a plantwide overhead rate based on direct labor costs. The president of the company recently heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the companys operations:
Family Model | Deluxe Model | |||
---|---|---|---|---|
Direct labor costs | $77,400 | $154,800 | ||
Machine hours | 2,000 | 2,000 | ||
Setup hours | 200 | 800 |
Total estimated overhead costs are $464,400. Overhead cost allocated to the machining activity cost pool is $278,640 and $185,760 is allocated to the machine setup activity cost pool.
(a)
Correct answer icon
Your answer is correct.
Compute the overhead rate using the traditional (plantwide) approach. (Round answer to 2 decimal places, e.g. 15.25.)
Overhead rate | $2.00 |
eTextbook and Media
Attempts: 1 of 3 used
(b)
Correct answer icon
Your answer is correct.
Compute the overhead rates using the activity-based costing approach. (Round answers to 2 decimal places, e.g. 15.25.)
Overhead Rate | ||
---|---|---|
Machining | $69.66 per hour | |
Machine set up | $185.76 per hour |
eTextbook and Media
Assistance Used
Attempts: 1 of 3 used
(c)
Determine the difference in allocation between the two approaches.
Family Model | Deluxe Model | |||
---|---|---|---|---|
Traditional | $enter a dollar amount | $enter a dollar amount | ||
ABC | $enter a dollar amount | $enter a dollar amount | ||
Difference | $enter a dollar amount | $enter a dollar amount |
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