PA4-2 Assigning Costs Using Traditional System, Assigning Costs Using Activity Proportions [LO 4-1, 4-3, 4-5, 4-6]...

PA4-2 Assigning Costs Using Traditional System, Assigning Costs Using Activity Proportions [LO 4-1, 4-3, 4-5, 4-6]

Carlise Corp., which manufactures ceiling fans, currently has two product lines, the Indoor and the Outdoor. Carlise has total overhead of $133,810.

Carlise has identified the following information about its overhead activity cost pools and the two product lines:

Activity Cost Pools	Cost Driver	Cost Assigned to Pool			Quantity/Amount Consumed by Indoor Line	Quantity/Amount Consumed by Outdoor Line
Materials handling	Number of moves		$	17,010	630 moves	270 moves
Quality control	Number of inspections		$	85,120	5,600 inspections	5,600 inspections
Machine maintenance	Number of machine hours		$	31,680	20,000 machine hours	24,000 machine hours

Required:
1. Suppose Carlise used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.)

2. Calculate the activity proportions for each cost pool in Carlise's ABC system. (Round your answers to 2 decimal places.)

3. Calculate the amount of overhead that Carlise will assign to the Indoor line if it uses an ABC system. (Round your intermediate calculations to 2 decimal places and round your final answers to the nearest whole dollar amount.)

4. Determine the amount of overhead Carlise will assign to the Outdoor line if it uses an ABC system. (Round your intermediate calculations to 2 decimal places and round your final answers to the nearest whole dollar amount.)

5. Compare the results for a traditional system with an ABC system. Which do you think is more accurate?

	Traditional System
	ABC System

Expert Solution

1)	predetermined overhead rate = 133,180/(44,000)
			3.026818	per machine hour

	overhead assigned = overhead rate * machine hrs used

	indoor Model =		3.03*16000
			60536

	outdoor model =		3.03*18000
			72644


		overhead assigned
	Indoor Model	60536
	outdoor model	72644
	total	133180




			indoor		outdoor
2)			line		lines
	Materials handling		70.00%		30.00%	per move
	Quality control		50.00%		50.00%	per inspection
	Machine maintenance		45.45%		54.55%	per machine hour





3)	Indoor model
	Materials handling		11907
	Quality control		42560
	Machine maintenance		14400
	total overhead assigned		68867



4)	outdoor model
	Materials handling		5103
	Quality control		42560
	Machine maintenance		17280
	total overhead assigned		64943

5)	ABC system

ekkarill92 answered 4 months ago

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