Question

Question 31 Elle Inc. makes two types of handbags: standard and custom. The controller has decided to use a plant-wide overhead rate based on direct labour costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine set-up. Presented below is information related to the company’s operations. Standard Custom Direct labour costs $50,000 $100,000 Machine hours 500 1,000 Set-up hours 100 400 Total estimated overhead costs are $277,500. The overhead cost allocated to the machining activity cost pool is $169,500, and $108,000 is allocated to the machine set-up activity cost pool.

(c) Your answer is partially correct. Try again. Determine the difference in allocation between the two approaches. (Enter negative answers using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).) Traditional costing (A) Activity-based costing (B) Difference (A) – (B) Standard $ $ $ Custom $ $ $

Answer 1