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 $1,128,000 across three activities: Design, Production, and Inspection. Under the traditional volume-based costing system, the predetermined overhead rate is $2.82/direct labor hour. Under the ABC system, the rate for each activity and usage of the activity drivers are as follows: Activity Rate Usage by Design (Engineering Hours) Production (Direct Labor Hours) Inspection (Batches) $ 400/hour $1.75 $ 500 Product A 210 100,000 320 Usage by Product B 310 300,000 120 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 B under the traditional costing system. Indirect Manufacturing Costs c. Calculate the indirect manufacturing costs assigned to Product A under the ABC system. Indirect Manufacturing Costs d. Calculate the indirect manufacturing costs assigned to Product B under the ABC system. Indirect Manufacturing Costs e. Which product is under-costed and which is over-costed under the volume-based cost system compared to ABC? Product A Product B 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 $1,128,000 across three activities: Design, Production, and Inspection. Under the traditional volume-based costing system, the predetermined overhead rate is $2.82/direct labor hour. Under the ABC system, the rate for each activity and usage of the activity drivers are as follows: Activity Rate Usage by Design (Engineering Hours) Production (Direct Labor Hours) Inspection (Batches) $ 400/hour $1.75 $ 500 Product A 210 100,000 320 Usage by Product B 310 300,000 120 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 B under the traditional costing system. Indirect Manufacturing Costs c. Calculate the indirect manufacturing costs assigned to Product A under the ABC system. Indirect Manufacturing Costs d. Calculate the indirect manufacturing costs assigned to Product B under the ABC system. Indirect Manufacturing Costs e. Which product is under-costed and which is over-costed under the volume-based cost system compared to ABC? Product A Product B
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Answer a Traditional Costing System for Product A Total Manufacturing Overhead Predetermined Overhea... View the full answer
Related Book For
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Posted Date:
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