Carter, Inc. produces two different products, Product A and Product B. Carter uses a traditional volume-based...

 

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Carter, Inc. produces two different products, Product A and Product B. Carter uses a traditional volume-based costing system in which direct labor hours are the allocation base. Carter is considering switching to an ABC system by splitting its manufacturing overhead cost of $1,000,000 across three activities: Design, Production, and Inspection. Under the traditional volume-based costing system, the predetermined overhead rate is $2.50/direct labor hour. Under the ABC system, the rate for each activity and usage of the activity drivers are as follows: Activity Rate $ 600/hour $ 1.25 Design (Engineering Hours) Usage by Product A 200 100, 000 300 Usage by Product B 300 300, 000 100 Production (Direct Labor Hours) Inspection (Batches) $ 500 Required: a. Calculate the indirect manufacturing costs assigned to Product A under the traditional costing system. Indirect Manufacturing Costs b. Calculate the indirect manufacturing costs assigned to Product A under the ABC system. Indirect Manufacturing Costs Carter, Inc. produces two different products, Product A and Product B. Carter uses a traditional volume-based costing system in which direct labor hours are the allocation base. Carter is considering switching to an ABC system by splitting its manufacturing overhead cost of $1,000,000 across three activities: Design, Production, and Inspection. Under the traditional volume-based costing system, the predetermined overhead rate is $2.50/direct labor hour. Under the ABC system, the rate for each activity and usage of the activity drivers are as follows: Activity Rate $ 600/hour $ 1.25 Design (Engineering Hours) Usage by Product A 200 100, 000 300 Usage by Product B 300 300, 000 100 Production (Direct Labor Hours) Inspection (Batches) $ 500 Required: a. Calculate the indirect manufacturing costs assigned to Product A under the traditional costing system. Indirect Manufacturing Costs b. Calculate the indirect manufacturing costs assigned to Product A under the ABC system. Indirect Manufacturing Costs

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a Predetermined overhead rate 250 per direct labor hour ... View the full answer