Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Novell Inc. is a manufacturer of knives. The company has always used a plant-wide rate for allocating manufacturing overhead to its products. The allocation method

image text in transcribedimage text in transcribed

Novell Inc. is a manufacturer of knives. The company has always used a plant-wide rate for allocating manufacturing overhead to its products. The allocation method was based on direct manufacturing labour hours, and the rate was $400 per labour hour. The plant manager believes it is time to change to a better method of cost allocation. The accounting department has established new relationships between production activities and manufacturing overhead as follows: Activity Cost driver Allocation rate Materials handling Number of parts $4 per part Assembly Labour hours $40 per hour Inspection Time item is at inspection station $6 per minute What are the indirect manufacturing costs of a batch of 100 pairs of knives, assuming that ABC is used? The batch requires 200 parts, 12 direct manufacturing labour hours and five minutes of inspection time. Which of the following is not a correct analysis for a batch of knives from the information provided above: O Using ABC, this product is cross subsidizing other products sold within Novell. If the selling price for a batch of knives is $ 5,000, under the traditional costing, Novell will be making a profit of $ 200 per batch. O Under the traditional costing, the overhead cost applied is $ 4,800 O The initial price is based on the traditional cost. In comparison to ABC, this batch of knives is under-priced. If the selling price for a batch of knives is $ 5,000, under ABC, Novell will be making $ 3,690 per batch

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting For Decision Makers

Authors: Peter Atrill

8th Edition

1292099046, 978-1292099040

More Books

Students also viewed these Accounting questions

Question

What is the message frequency?

Answered: 1 week ago

Question

What is the schedule for this project?

Answered: 1 week ago

Question

Who is responsible for this project?

Answered: 1 week ago