Use the following information to answer questions 5 – 6: Ellyn’s Doll House Company (EDHC) manufactures...

Use the following information to answer questions 5 – 6: Ellyn’s Doll House Company (EDHC) manufactures large and small doll houses. Historically, EDHC has utilized a traditional job order costing system to allocate manufacturing overhead. They are considering switching to an Activity Based Costing System. (All per unit answers are rounded to the nearest dollar.) EDHC has the following Direct Labor and Direct Material Costs for a large doll house and a small doll house. Large Small Direct Materials $50 $30 Direct Labor 25 15 OH applied Total 5. Overhead is applied on the basis of machine hours. It takes 3 machine hours to produce a large doll house and 2 machine hours to produce a small doll house. EDHC produces 2,000 large doll houses and 10,000 small doll houses in a year. Total manufacturing overhead is $780,000. Under the traditional job order costing system, what is the cost of one small doll house (rounded to nearest dollar)? a. $45 b. $105 c. $110 d. $30 e. $75 6. EDHC does an Activity Based Cost Analysis and identifies 3 major activities. Here is an analysis of their findings: Activity/Measure Overhead Large Small Total Labor related/direct labor hrs ($58) $580,000 4,000 6,000 10,000 direct labor hrs Machine related/machine hrs ($4) $104,000 6,000 20,000 26,000 machine hrs Production orders/no. of orders ($320) $ 96,000 100 200 300 orders $780,000 Under an Activity Based Costing System, what is the cost of one small doll house (rounded to nearest dollar)? a) $45 b) $94 c) $110 d) $92 e) $30 Please kindly show me step by step calculations

Expert Solution

Answer 5
	Large	Small
Direct Materials	50	30
Direct Labor	25	15
Machine hours	3	2
Produce	2,000	10,000
Total machine hours (machine hours * produce)	6000	20000

Under the traditional job order costing system, what is the cost of one small doll house (rounded to nearest dollar)?

Total manufacturing overhead	780000
Divided by: Total machine hours (6000+20000)	26000
Overhead rate per machine hour	30

Direct Materials	30
Direct Labor	15
Applied Overhead (2*30)	60
Cost of one small doll house	105
Option B is Correct.

Answer 6 Under an Activity Based Costing System, what is the cost of one small doll house (rounded to nearest dollar)?
Overhead allocated under Activity based costing
Labor related (6000*58)	348000
Machine related (4*20000)	80000
Production orders (320*200)	64000
Total overhead allocated under Activity based costing	492000
Divided by: Unit Produced	10000
Overhead per unit	49.2

Direct Materials	30
Direct Labor	15
Applied Overhead (Rounded)	49
Cost of one small doll house	94
Option B is Correct.

ekkarill92 answered 2 years ago

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