1. Kappa Manufacturing

Scenario: Cost Allocation Methods

Data: Kappa Manufacturing allocates overhead costs using traditional and activity-based costing (ABC) methods. The company reported the following data for the year 2023:

• Total Overhead Costs: $1,500,000
• Cost Driver for Traditional Costing: Direct Labor Hours
• Cost Driver for ABC: Number of Machine Setups

Requirements: Allocate overhead costs to Kappa Manufacturing's production departments using both traditional and ABC methods. Calculate the overhead cost per unit for a specific product line under each method. Compare and analyze the differences in cost allocation between traditional costing and ABC. Discuss the advantages of ABC for Kappa Manufacturing in improving cost accuracy and decision-making. Recommend improvements to Kappa Manufacturing's cost allocation practices.