Question

Vaughn Corporation manufactures safes—large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Vaughn is analyzing the profitability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The information shown below relates to overhead.

		Mobile Safes		Walk-in Safes
Units planned for production		200		50
Material moves per product line		300		200
Purchase orders per product line		450		350
Direct labor hours per product line		800		1,700

(a)

The total estimated manufacturing overhead was $276,000. Under traditional costing (which assigns overhead on the basis of direct labor hours), what amount of manufacturing overhead costs are assigned to: (Round answers to 2 decimal places, e.g. 12.25.)

(1)		One mobile safe		$enter a dollar amount per unit	per unit
(2)		One walk-in safe		$enter a dollar amount per unit	per unit

Compare the amount of overhead allocated to one mobile safe and to one walk-in safe under the traditional costing approach versus under ABC.
Total overhead allocated under traditional costing.

Total overhead allocated under ABC. (Round answers to 2 decimal places, e.g. 250.00.)

One mobile safe? $
One walk-in safe? $

Answer 1

Vaughn Corporation
Answer a 1
Calculation of Predetermined OH Rate	Mobile	Walk In	Total	Note
Direct Labor hours	800.00	1,700.00	2,500.00	A
Total overhead			276,000.00	B
Predetermined OH Rate			110.40	C=B/A
Total Allocated OH	88,320.00	187,680.00	276,000.00	D=C*A
Answer a 2	Mobile	Walk In		Note
Allocated OH	88,320.00	187,680.00		See D
Number of units	200.00	50.00		E
OH allocated per unit	441.60	3,753.60		F=D/E
For ABC please provide cost driver and usages data.