Amazon Company manufactures two products that can be produced on two different production lines; DVDs and Videotapes.
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Question:
Amazon Company manufactures two products that can be produced on two different production lines; DVDs and Videotapes. The following activity and cost information has been accumulated:
Number of
Product Supervision Inspection Direct Labor Hours
DVDs 48 480 5,200
Videotapes 112 800 2800
Overhead costs $160,000 $480,000
Required:
- If Amazon was using the traditional costing system with direct labor hours as the overhead costs allocation base: Calculate the total amount of overhead costs assigned to the DVDs and Videotapes.
Managers have decided to revise their current assignment of overhead costs; Supervision and Inspection are identified as the activity-cost drivers for overhead:
- Compute the cost-driver rate for each overhead activity.
- What is the total amount of overhead costs assigned to DVDs and Videotapes?
- Explain the difference between the Overhead costs obtained from the traditional costing system and the ABC system. Which system provides a better estimate of costs? Why?
Related Book For
OM4 operations management
ISBN: 978-1133372424
4th edition
Authors: David Alan Collier, James R. Evans
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