4-11 APPROXIMATELY RELEVANT ABC Golder Company has identified the following overhead activities, costs, and activity dri-...
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4-11 APPROXIMATELY RELEVANT ABC Golder Company has identified the following overhead activities, costs, and activity dri- vers for the coming year: LO4 Activity Expected Cost Activity Driver Activity Capacity Setting up equipment Ordering materials Machining Receiving $252,000 36,000 252,000 60,000 Number of setups Number of orders Machine hours 300 1,800 21,000 2,500 Receiving hours Golder produces two models of cell phones with the following expected activity demands: Model A Model B Units completed Number of setups Number of orders 10,000 20,000 100 200 1,200 9,000 1,750 600 12,000 750 Machine hours Receiving hours Required: 1. Determine the total overhead assigned to each product using the four activity drivers. 2. Determine the total overhead assigned to each model using the two most expen- sive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs. 3. Using ABC as the benchmark, calculate the percentage error and comment on the accuracy of the reduced system. Explain why this approach may be desirable. 4-11 APPROXIMATELY RELEVANT ABC Golder Company has identified the following overhead activities, costs, and activity dri- vers for the coming year: LO4 Activity Expected Cost Activity Driver Activity Capacity Setting up equipment Ordering materials Machining Receiving $252,000 36,000 252,000 60,000 Number of setups Number of orders Machine hours 300 1,800 21,000 2,500 Receiving hours Golder produces two models of cell phones with the following expected activity demands: Model A Model B Units completed Number of setups Number of orders 10,000 20,000 100 200 1,200 9,000 1,750 600 12,000 750 Machine hours Receiving hours Required: 1. Determine the total overhead assigned to each product using the four activity drivers. 2. Determine the total overhead assigned to each model using the two most expen- sive activities. The costs of the two relatively inexpensive activities are allocated to the two expensive activities in proportion to their costs. 3. Using ABC as the benchmark, calculate the percentage error and comment on the accuracy of the reduced system. Explain why this approach may be desirable.
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Plantwide Overhead rate Overhead costs are all the costs other than direct material and direct labor that are not tied to the production Kenton 2019 Businesses use the manufacturing overhead rate to a... View the full answer
Related Book For
Cornerstones of Managerial Accounting
ISBN: 978-0176530884
2nd Canadian edition
Authors: Maryanne M. Mowen, Don Hanson, Dan L. Heitger, David McConomy, Jeffrey Pittman
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