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The ABC system is designed to allow direct material and direct labour to be traced directly to each of the company's four main products. The
The ABC system is designed to allow direct material and direct labour to be traced directly to each of the company's four main products. The system also includes four activity cost pools for overhead: Quality Control and Inspection, Order Processing, Delivery and Installation, and Other. The activity measures are units produced for Quality Control and Inspection, number of orders for Order Processing, and number of deliveries for Delivery and Installation. The Other cost pool has no activity measure. The following costs will be assigned using the ABC system: Indirect factory Salaries Delivery Crew Wages Expense $520,000 $140,000 The distribution of resource consumption across the activity cost pools is as follows: Quality Control Delivery and Order Inspection Installation Processing Other Totals Indirect factory salaries 50% 25% 20% 5% 10% Delivery crew wages expense...... 0% 75% 10% 15% 00% and The ABC system at Movie Time contains the following activity cost pools and activity rates this year: Activity Total Activity Quality control and inspection. 4800 units produced Delivery and installation 1.200 deliveries Order processing 920 orders processed Other None Activity data have also been supplied for the leather recliner product line: Total Activity for the Leather Activity Recliner Product Line Quality control and inspection.. 1,200 units produced Delivery and installation. 300 deliveries Order processing 230 orders processed Required: 1. Carry out the first stage allocations of costs to activity cost pools and using the first-stage allocation compute the activity rates for the ABC system. Round to the nearest whole cent. 2. Determine the total overhead cost that would be assigned to the leather recliner product line using the ABC system
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