Question

Perdon Corporation manufactures safes—large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The information shown below relates to overhead.

		Mobile Safes		Walk-in Safes
Units planned for production		200		50
Material moves per product line		300		200
Purchase orders per product line		450		350
Direct labor hours per product line		800		1,700

				B. Compare the amount of overhead allocated to one mobile sale and to one walk in safe under the tradional costing approach versus under ABC Traditional Costing ABC Mobile Safe $ $ Walk in C. The total estimated manufacturing overhead of $260,000 was comprised of $160,000 for materials handling costs and $100,000 for purchasing activity cost under ABC what amount of costing are assigned to? one mobile safe $ per unit one walk in $ per unit

Answer 1

B.   The Amount of Total Manufacturing overhead allocated to one mobile sale and to one walk in safe under the traditional costing approach

Total Manufacturing overhead assigned to Mobile Safes

Total Manufacturing overhead* Direct labour hours of Mobile Safes

Direct labour hours of both Mobile safes and Walk in safe

=$260000*800/800+1700=$83200

Assigned to One Mobile Safe=$83200/200=416

Total Manufacturing overhead assigned to walk in safe

Total Manufacturing overhead* Direct labour hours of walk in Safe

Direct labour hours of both Mobile safes and Walk in safe

=$260000*1700/800+1700=$176800

Assigned to One walk Safe=$176800/50=3536

The Amount of Total Manufacturing overhead allocated to one mobile sale and to one walk in safe under the Activity costing approach

Manufacturing Overhead	Mobile Safe	Walk-in Safe
1) Material Handling Cost = 160000	160000 * 300 / 300+200 = 96000	160000 * 200 / 300+200 =64000
2) Purchasing activity Cost =100000	100000 * 450 / 450+350 = 56250	100000 * 350 / 450+350 = 43750
Total manufacturing Overhead assigned (1+2)	152250	107750
Manufacturing overhead per unit	152250 / 200 = $761.25	107750 / 50 = $2155

C. Amount of costing are assigned to    one mobile safe $ per unit and one walk in $ per unit

	Traditional Costing	Actvity-based Costing
Mobile Safe	$ 416	$ 761.25
Walk-in Safe	$ 3536	$ 2155