Gary King has been studying his department's profitability reports for the past six months. He has...
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Gary King has been studying his department's profitability reports for the past six months. He has just completed managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $1,248,060 is based on 41,602 machine hours. In an initial analysis of overhead costs. Gary has identified the following activity cost pools. Cost Pool Expected Cost Expected Activities Product assembly $ 651,000 46.500 machine hours Machine setup and calibration 436,600 5,900 setups Product inspection 80,460 1,490 batches Raw materials storage 80,000 320,000 pounds $ 1.248,060 Gary King is taking the next step in his exploration of activity-based costing and wants to examine the overhead costs that would be allocated to two of the department's four products. He has gathered the following budget information about each product. Driver Usage Machine hours Component 3FS Component T76 1.280 9,600 Setups Batches 40 15 Pounds of raw materials 10,000 220 10 10,000 (a) Calculate the total overhead allocated to each component under the traditional method using machine hours as the overhead application base. Component 3F5 Component T76 Total Overhead allocated 38400 288000 (b) Calculate the total overhead allocated to each component under activity-based costing. (Round overhead rates to 2 decimal places, eg. 5.27 and round final answers to O decimal places, eg. 5,275.) Total Overhead allocated Component 3F5 Component T76 Gary King has been studying his department's profitability reports for the past six months. He has just completed managerial accounting course and is beginning to question the company's approach to allocating overhead to products based on machine hours. The current department overhead budget of $1,248,060 is based on 41,602 machine hours. In an initial analysis of overhead costs. Gary has identified the following activity cost pools. Cost Pool Expected Cost Expected Activities Product assembly $ 651,000 46.500 machine hours Machine setup and calibration 436,600 5,900 setups Product inspection 80,460 1,490 batches Raw materials storage 80,000 320,000 pounds $ 1.248,060 Gary King is taking the next step in his exploration of activity-based costing and wants to examine the overhead costs that would be allocated to two of the department's four products. He has gathered the following budget information about each product. Driver Usage Machine hours Component 3FS Component T76 1.280 9,600 Setups Batches 40 15 Pounds of raw materials 10,000 220 10 10,000 (a) Calculate the total overhead allocated to each component under the traditional method using machine hours as the overhead application base. Component 3F5 Component T76 Total Overhead allocated 38400 288000 (b) Calculate the total overhead allocated to each component under activity-based costing. (Round overhead rates to 2 decimal places, eg. 5.27 and round final answers to O decimal places, eg. 5,275.) Total Overhead allocated Component 3F5 Component T76
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