In: Accounting
Sitwell Corporation manufactures titanium and aluminum tennis racquets. Sitwell's total overhead costs consist of assembly costs and inspection costs. The following information is available:
Cost | Titanium | Aluminum | Total Cost |
Assembly | 500 mach. hours | 500 mach. hours | $45,000 |
Inspections | 350 | 150 | $75,000 |
2,100 labor hours | 1,900 labor hours |
Sitwell is considering switching from one overhead rate based on
labor hours to activity-based costing.
Using activity-based costing, how much assembly cost is assigned to
titanium racquets?
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AS FOR GIVEN DATA..
Sitwell Corporation manufactures titanium and aluminum tennis racquets. Sitwell's total overhead costs consist of assembly costs and inspection costs. The following information is available:
Cost | Titanium | Aluminum | Total Cost |
Assembly | 500 mach. hours | 500 mach. hours | $45,000 |
Inspections | 350 | 150 | $75,000 |
2,100 labor hours | 1,900 labor hours |
Sitwell is considering switching from one overhead
rate based on labor hours to activity-based costing.
Using activity-based costing, how much assembly cost is assigned to
titanium racquets
Solution:
Total Assembly hours = 500 + 500 = 1000
Total Assembly cost = $45,000
Cost per hour = $45,000 / 1000 = $45 per hour
Total Assembly cost = $22,500
Inspection costs are kept seperate.
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