Custer Corporation manufactures safes€”large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Custer is analyzing the profitability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The following information relates to overhead.

Instructions
(a) The total estimated manufacturing overhead was $235,000. Under traditional costing (which assigns overhead on the basis of direct-labor hours), what amount of manufacturing overhead costs are assigned to:
(1) One mobile safe?
(2) One walk-in safe?
(b) The total estimated manufacturing overhead of $235,000 was comprised of $150,000 for material-handling costs and $85,000 for purchasing activity costs. Under activity-based costing (ABC):
(1) What amount of material handling costs are assigned to:
(a) One mobile safe?
(b) One walk-in safe?
(2) What amount of purchasing activity costs are assigned to:
(a) One mobile safe?
(b) One walk-in safe?
(c) Compare the amount of overhead allocated to one mobile safe and to one walk-in safe under the traditional costing approach versus underABC.

Transcribed Image Text:

Mobile Safes Units planned for production Material moves per product line Purchase orders Direct labor hours per product line 200 300 450 800 Walk-in Safes 50 200 350 1,700 per product line