Toshiba Company produces computers and uses a plantwide allocation rate based on direct labor hours. But because the volume of sales for standard model is lower than expected, a manager is anticipating, implementing Activity Based Costing (ABC). Under the ABC system, three cost pools are identified. An allocation base for each of the cost pool is identified as below based on the estimated numbers of annual production volume over last five years. Allocation base for Machining costs is machine hours, Setup costs is the number of product runs and Inspection costs is hours of inspection. (7 points each except for 7 8 points) Overhead Costs (S) Machining costs Setup Costs Inspection Costs Total Estimated production unit (Q) Direct material ($) Direct labor costs (S) Direct labor hours Machine hours Number of product runs Inspection hours $341,000 120,000 159,000 620,000 Film 60,000 150,000 60,000 2,000 25,000 50 1,100 1. Compute a plantwide allocation rate. Standard 100,000 300,000 100,000 6,000 55,000 50 500 total 160,000 $450,000 $160,000 2,000 = 155,000 6,000 = 465,000 8,000 80,000 100 1,600 $620,000 775 8,000 2. Based on plantwide allocation rate how much total overhead costs is allocated to the film and standard computers. Rate 77.5 X 100,000 $12,400,000 is Allecared 7757 3. Based on above calculations, compute the dollar value of overhead costs allocated to each unit of computers. Film- 155,000/60,000 = 2.58 Standard- c 465,000 100,000 = 4.65

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Toshiba Company produces computers and uses a plantwide allocation rate based on direct labor hours. But because the volume of sales for standard model is lower than expected, a manager is anticipating. implementing Activity Based Costing (ABC). Under the ABC system, three cost pools are identified. An allocation base for each of the cost pool is identified as below based on the estimated numbers of annual production volume over last five years. Allocation base for Machining costs is machine hours, Setup costs is the number of product runs and Inspection costs is hours of inspection. (7 points each except for 7 8 points) Overhead Costs (S) Machining costs $341,000 Setup Costs 120,000 Inspection Costs 159,000 Total 620,000 Film Standard total Estimated production unit (Q) 60,000 100,000 160,000 Direct material (S) 150,000 300,000 $450,000 Direct labor costs (S) 60,000 100,000 $160,000 Direct labor hours 2,000 6,000 8,000 Machine hours 25,000 55,000 80,000 Number of product runs 50 50 100 Inspection hours 1,100 500 1,600 1. Compute a plantwide allocation rate. $620,000 77.5 8,000 2. Based on plantwide allocation rate how much total overhead costs is allocated to the film and standard computers. Rate = 77.5 x New $12,400,000 is Allecared 2,000 6000 = 155,000 465,000 3. Based on above calculations, compute the dollar value of overhead costs allocated to each unit of computers. Film-155,000 60,000 = 2.58 Standard-465,000 100,000 = 4.65