Whitman Enterprises uses a traditional-costing system to estimate quality-control costs for its Dragon product line. Costs...
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Whitman Enterprises uses a traditional-costing system to estimate quality-control costs for its Dragon product line. Costs are estimated at 45% of direct-labor cost, and direct labor totaled $872,000 for the quarter just ended. Management is contemplating a change to activity-based costing, and has established three cost pools: incoming material inspection, in-process inspection, and final product certification. Number of parts, number of units, and number of orders have been selected as the respective cost drivers. The following data show the pool rates that have been calculated by the company along with the quantity of driver units for the Dragon's: Driver Quantities 619,040 parts 29,200 units Pool Rate 0.70 per part 0.24 per unit 127.00 per order 102 orders Required: A. Calculate the quarterly quality-control cost that is allocated to the Dragon product line under Whitman's traditional-costing system. B. Calculate the quarterly quality-control cost that is allocated to the Dragon product line if activity-based costing is used. C. Does the traditional approach under- or overcost the product line? By what amount? Quality-control cost A. Quality-control cost C. Whitman Enterprises uses a traditional-costing system to estimate quality-control costs for its Dragon product line. Costs are estimated at 45% of direct-labor cost, and direct labor totaled $872,000 for the quarter just ended. Management is contemplating a change to activity-based costing, and has established three cost pools: incoming material inspection, in-process inspection, and final product certification. Number of parts, number of units, and number of orders have been selected as the respective cost drivers. The following data show the pool rates that have been calculated by the company along with the quantity of driver units for the Dragon's: Driver Quantities 619,040 parts 29,200 units Pool Rate 0.70 per part 0.24 per unit 127.00 per order 102 orders Required: A. Calculate the quarterly quality-control cost that is allocated to the Dragon product line under Whitman's traditional-costing system. B. Calculate the quarterly quality-control cost that is allocated to the Dragon product line if activity-based costing is used. C. Does the traditional approach under- or overcost the product line? By what amount? Quality-control cost A. Quality-control cost C.
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Related Book For
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III
Posted Date:
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