Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Tamarisk Company produces two products: MB-R and MB-X. Currently, Tamarisk allocates overhead based on direct labour hours. Overhead is estimated at $392,000. The cost accountant

Tamarisk Company produces two products: MB-R and MB-X. Currently, Tamarisk allocates overhead based on direct labour hours. Overhead is estimated at $392,000. The cost accountant realizes that there are some differences in how resources are being used in producing these two components and is considering the use of ABC to allocate overhead. She determines that overhead is caused by testing and inspections, $108,000; machine setup, $72,000; machine stamping, $160,000; and plant maintenance, $52,000. Tamarisk estimates the following activities related to the overhead costs:
Activity Cost Driver MB-R MB-X
Testing and inspections Number of testing and inspections 360 360
Machine setup Number of setups 120 80
Machine stamping Number of machine hours 21,000 11,000
Plant maintenance Direct labour hours 1,500 2,500
Use ABC cost hierarchy to classify each activity.
Activity Cost Driver
Testing and inspections

Unit level activities and costsFacility sustaining level activities and costsBatch level activities and costs

Machine setup

Batch level activities and costsUnit level activities and costsFacility sustaining level activities and costs

Machine stamping

Batch level activities and costsUnit level activities and costsFacility sustaining level activities and costs

Plant maintenance

Unit level activities and costsFacility sustaining level activities and costsBatch level activities and costs

Compute the amount of overhead assigned to each product using the traditional (i.e., direct labour hours) costing method. (Round labor rate per hour to 2 decimal places, e.g. 52.75 and the final answers to 0 decimal places, e.g. 5,275.)
Overhead assigned
MB-R $

MB-X $

Compute the amount of overhead assigned to each product using ABC.
Activity MB-R OH MB-X OH
Testing and inspections $

$

Machine setup $

$

Machine stamping $

$

Plant maintenance $

$

Which product is overcosted using the traditional costing method?
Overcosted product

MB-XMB-R

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

Step: 3

blur-text-image

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

Accounting Custom Edition For National American University

Authors: Charles T. Horngren, Walter T. Harrison Jr, M. Suzanne Oliver

9th Edition

1256297585, 978-1256297581

More Books

Students also viewed these Accounting questions

Question

3. Provide time for independent and extended projects.

Answered: 1 week ago