ABC Airlines is a cargo air freight company and plans to add two new routes: Victoria to
Question:
ABC Airlines is a cargo air freight company and plans to add two new routes: Victoria to Los Angeles (Route 105) and Calgary to San Francisco (Route 106).
The company is setting its rate charges for the two routes and expects to have:
625 | Containers for Route 105 |
375 | Containers for Route 106 |
1000 | |
In addition, the company must complete regulatory forms as follows: | |
70 | Forms per Flight for Route 105 |
30 | Forms per Flight for Route 106 |
100 | |
Preparation time it takes to load the containers per flight: | |
110 | Hours per Flight for Route 105 |
120 | Hours per Flight for Route 106 |
230 | |
The company's total costs for the year are expected to be: | |
$600,000 | Total Container Handling |
$250,000 | Total Regulatory Approval |
Instructions
Under atraditional accounting system to allocate overhead using container loads as the base:
Determine the amount of overhead that will be assigned to Route 105.
Determine the amount of overhead that will be assigned to Route 106.
If the company switches to an ABC accounting system, then use the regulatory forms and hours to load containers to allocate overhead costs.
Determine the amount of overhead that will be assigned to Route 105.
Determine the amount of overhead that will be assigned to Route 106.
Managerial Accounting An Introduction to Concepts Methods and Uses
ISBN: 978-0324639766
10th Edition
Authors: Michael W. Maher, Clyde P. Stickney, Roman L. Weil