Question

Summit Company makes two models of snowboards, the Junior and the Expert. Its basic production information follows:


Summit has monthly overhead of $484,746, which is divided into the following cost pools:


The company has also compiled the following information about the chosen cost drivers:


Required:
1. Suppose Summit used a traditional costing system with machine hours as the cost driver.
Determine the amount of overhead assigned to each product line.
2. Calculate the production cost per unit for each of Summit’s products under a traditional costing system.
3. Calculate Summit’s gross margin per unit for each product under the traditional costing system.
4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Summit wanted to implement an ABC system.
5. Assuming an ABC system, assign overhead costs to each product based on activity demands.
6. Calculate the production cost per unit for each of Summit’s products with an ABC system.
7. Calculate Summit’s gross margin per unit for each product under an ABC system.
8. Compare the gross margin of each product under the traditional system andABC.


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  • CreatedFebruary 27, 2015
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