Kragan Clothing Company manufactures its own designed and labeled athletic wear and sells its products through...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Kragan Clothing Company manufactures its own designed and labeled athletic wear and sells its products through catalog sales and retail outlets. While Kragan has for years used activity-based costing in its manufacturing activities, it has always used traditional costing in assigning its selling costs to its product lines. Selling costs have traditionally been assigned to Kragan's product lines at a rate of 70% of direct materials costs. Its direct materials costs for the month of March for Kragan's "high-intensity" line of athletic wear are $399,000. The company has decided to extend activity-based costing to its selling costs. Data relating to the "high-intensity" line of products for the month of March are as follows. Activity Cost Pools Sales commissions. Advertising-TV Advertising-Internet Catalogs Cost of catalog sales Credit and collection Cost Drivers Dollar sales Minutes Column inches Catalogs mailed Catalog orders Dollar sales. Overhead Rate $ $0.05 per dollar sales $300 per minute $10 per column inchi $2.50 per catalog $1 per catalog order $0.03 per dollar sales Number of Cost Drivers Used per Activity Compute the selling costs to be assigned to the "high-intensity" line of athletic wear for the month of March (1) using the traditional product costing system (direct materials cost is the cost driver), and (2) using activity-based costing. $916,000 270 2,000 60,600 9,500 $916,000 Traditional product costing Activity-based costing Selling cost to be assigned $ By what amount does the traditional product costing system undercost or overcost the "high-intensity" product line? Kragan Clothing Company manufactures its own designed and labeled athletic wear and sells its products through catalog sales and retail outlets. While Kragan has for years used activity-based costing in its manufacturing activities, it has always used traditional costing in assigning its selling costs to its product lines. Selling costs have traditionally been assigned to Kragan's product lines at a rate of 70% of direct materials costs. Its direct materials costs for the month of March for Kragan's "high-intensity" line of athletic wear are $399,000. The company has decided to extend activity-based costing to its selling costs. Data relating to the "high-intensity" line of products for the month of March are as follows. Activity Cost Pools Sales commissions. Advertising-TV Advertising-Internet Catalogs Cost of catalog sales Credit and collection Cost Drivers Dollar sales Minutes Column inches Catalogs mailed Catalog orders Dollar sales. Overhead Rate $ $0.05 per dollar sales $300 per minute $10 per column inchi $2.50 per catalog $1 per catalog order $0.03 per dollar sales Number of Cost Drivers Used per Activity Compute the selling costs to be assigned to the "high-intensity" line of athletic wear for the month of March (1) using the traditional product costing system (direct materials cost is the cost driver), and (2) using activity-based costing. $916,000 270 2,000 60,600 9,500 $916,000 Traditional product costing Activity-based costing Selling cost to be assigned $ By what amount does the traditional product costing system undercost or overcost the "high-intensity" product line?
Expert Answer:
Answer rating: 100% (QA)
a According to traditional costing system selling cost is 70 of 395000 Activity Based Costing sell... View the full answer
Related Book For
Financial Accounting
ISBN: 978-0078025549
3rd edition
Authors: J. David Spiceland, Wayne Thomas, Don Herrmann
Posted Date:
Students also viewed these accounting questions
-
Modern liability management has resulted in: A) increased sales of certificates of deposits to raise funds. B) increase the importance of deposits as a source of funds. C) reduced borrowing by banks...
-
A corporation issued 5,000 shares of its no par common stock that was assigned a $1 stated value per share. The issue price was $10 per share. The entry to record this transaction would be:
-
In 2009 Junior Corp acquired 6,000 shares of its $1 par value common stock at $36 per share. During 2010 Junior issued 3,000 of these shares at $50 per share Junior uses the cost method to account...
-
The quality of information that gives assurance that it is reasonably free of error and bias and is a faithful representation is: a Neutrality b Reliability c Relevance d Verifiability
-
A company has the following demand (a t ) for the previous nine weeks. Use the information to develop a four-period simple moving average and a forecast for period 10. Periodat 1..403 2.422 3325...
-
The Sarbanes-Oxley Act of 2002 makes it easier for corporate executives to ____________. (a) protect themselves from shareholder lawsuits (b) sue employees who commit illegal acts (c) be tried and...
-
Identify the effects of the following transactions on total stockholders' equity: Each transaction is independent. a. A \(10 \%\) stock dividend. Before the dividend, 500,000 shares of \(\$ 1\) par...
-
Refer to the Professional Judgment in Context feature "Thor Industries, Inc. and Mark Schwartzhoff: Fraudulent Reductions in Cost of Goods Sold Through Manipulation of Inventory Accounts." Answer the...
-
Production Departments The Madalilangto Ink Company prepared the following table for the year 2019: Service Departments H G U v W Rent 250,000 770,000 15,000 14,500 7,000 Repairs 100,000 120,500...
-
Bennett et al. (2003) measured the refractive index (RI) of a pane of glass at 49 di erent locations. She took a sample of 10 fragments at each location and determined the RI for each. The data from...
-
You have located a home that you wish to purchase and wish to evaluate bank financing options in order to determine your budget. Youve been working with a few banks on potential mortgage terms and...
-
Cavy Company completed 5,060 units during the year at a cost of $278,300. The beginning finished goods inventory was 1,110 units valued at $56,610. Assuming a FIFO cost flow, determine the cost of...
-
Prepare the journey entry for Wong to record the loans prepare the journey entry for Sugimoto to record the allowance.
-
Thomas, the sole shareholder of Price Corporation, has a basis of $825,000 in his stock. He exchanges his Price Corporation stock for $975,000 of Roland Corporation voting common stock plus land with...
-
Selected cost data for Classic Print Co. are as follows Estimated manufacturing overhead cost for the year $125,000 Estimated direct labor cost for the year 78,125 Actual manufacturing overhead cost...
-
A chip manufacturer makes video gaming chip that can be sold for $50. The chip material cost is $15 for each chip. The operations costs of the chip manufacturer (administration etc.) is $100000. The...
-
Hawk Homes, Incorporated makes one type of birdhouse that it sells for $30.10 each. Its variable cost is $14.70 per house, and its fixed costs total $13,459.60 per year. Hawk currently has the...
-
Why is it necessary to study the diffusion of molecules in biological systems?
-
The Giles Agency offers a 12% trade discount when providing advertising services of $1,000 or more to its customers. Audreys Antiques decides to purchase advertising services of $3,500 (not including...
-
On January 1, 2015, Water World issues $26 million of 7% bonds, due in 10 years, with interest payable semiannually on June 30 and December 31 each year. Water World intends to use the funds to build...
-
The income statement for Electronic Wonders reports net sales of $91,758 million and cost of goods sold of $69,278 million. An examination of balance sheet amounts indicates accounts receivable...
-
What three time elements are embedded in the definition of a liability?
-
A company signs a purchase order for 5,000 cases of a product at \($10\) per case. The product will be delivered next year. Is a liability for \($50,000\) recorded? Under what conditions will some...
-
What is a non-financial liability? Provide three examples, and explain how such liabilities are measured.
Study smarter with the SolutionInn App