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The owners have heard of other companies in the industry that are now using an activity-based costing system and are curious how an ABC system
| The owners have heard of other companies in the industry that are now using an activity-based costing system and are curious how an ABC system would affect their product costing decisions. After analyzing the indirect cost pool for Doha Doors, the owners identify six activities as generating indirect costs: production scheduling, material handling, machine setup, assembly, inspection and marketing. Doha Doors collected data related to the indirect cost activities as displayed in the table below. | ||||||||||
| Marks | ||||||||||
| Activity | Activity Cost | |||||||||
| Production scheduling | $ 118,000 | |||||||||
| Material handling | 55,040 | |||||||||
| Machine setup | 26,700 | |||||||||
| Assembly | 90,000 | |||||||||
| Inspection | 20,520 | |||||||||
| Marketing costs were determined to be 2% of the sales revenue for each type of door | 1 | |||||||||
| Total | 1 | |||||||||
| Requirements: | ||||||||||
| 1.) Compute the overhead allocation rate. | 4 | |||||||||
| Overhead allocation rate: | ||||||||||
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Fundamental Financial Accounting Concepts
Authors: Thomas P. Edmonds
11th Edition
1260786587, 9781260786583
