Question
In: Accounting
Hakara Company has been using direct labor costs as the basis for assigning overhead to its...
|
Hakara Company has been using direct labor costs as the basis for assigning overhead to its many products. Under this allocation system product A has been assigned overhead of $24.08 per unit while product B has been assigned $11.37 per unit. Management feels that an ABC system will provide a more accurate allocation of the overhead costs and has collected the following cost pool and cost driver information: |
| Cost Pools | Activity Costs | Cost Driver | Driver Consumption | ||
| Machine setup | $ 396,000 | Setup hours | 4,000 | ||
| Materials handling | 120,000 | Pounds of materials | 12,000 | ||
| Electric power | 38,000 | Kilowatt-hours | 38,000 | ||
| The following cost information pertains to the production of A and B, just two of its many products: |
|
A |
B |
|||||
| Number of units produced | 5,000 | 10,000 | ||||
| Direct materials cost | $ | 25,000 | $ | 34,000 | ||
| Direct labor cost | $ | 33,000 | $ | 28,000 | ||
| Number of setup hours | 100 | 100 | ||||
| Pounds of materials used | 2,000 | 1,000 | ||||
| Kilowatt-hours | 2,000 | 2,000 | ||||
|
1. Use activity-based costing to determine a unit cost for each product. (Round your final answers to 2 decimal places.) 2. Comment on management’s belief that the ABC system will generate an overhead allocation that is more accurate than the volume-based system currently in use. |
Solutions
ekkarill92 answered 2 years agoRelated Solutions
Hakara Company has been using direct labor costs as the basis for assigning overhead to its...
Hakara Company has been using direct labor costs as the basis
for assigning overhead to its many products. Under this allocation
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while product B has been assigned $8.69 per unit. Management feels
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overhead costs and has collected the following cost pool and cost
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Cost Driver
Driver Consumption
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Hakara Company has been using direct labor costs as the basis for assigning overhead to its...
Hakara Company has been using direct labor costs as the basis
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while product B has been assigned $13.58 per unit. Management feels
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driver information:
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Activity Costs
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Snowy Company calculates overhead on the basis of direct labor costs. Estimated overhead is $300,000 and...
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Group of answer choices
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