Momentum Corp., which manufactures skateboards, currently has two product lines, the Standard and the Deluxe, and $29,000 in total overhead.

The company has identified the following information about its overhead activity pools and the two product lines:

Required:

1. Suppose Momentum 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 activity rates for each cost pool in Momentum’s ABC system.

3. Calculate the amount of overhead that Momentum will assign to the Standard line if it uses an ABC system.

4. Determine the amount of overhead Momentum will assign to the Deluxe line if it uses an ABC system.

5. Compare the results for the traditional system with those of the ABC system. Which do you think is more accurate and why?

Transcribed Image Text:

Activity Pools Cost Driver to Pool Cost Assigned Quantity/Amount Quantity/Amount Consumed Standard Line Consumed Deluxe Line Material handling Number of $ 1,400 100 moves 75 moves moves Quality control Number of $ 5,100 1,000 inspections 875 inspections inspections Machine Number of $22,500 maintenance machine hours 8,000 machine hours 12,000 machine hours