Pepper's Products manufactures and sells two types of chew toys for pets-Squeaky and Silent. In May,...

 

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Pepper's Products manufactures and sells two types of chew toys for pets-Squeaky and Silent. In May, Pepper's Products had the following costs and revenues. Sales revenue Direct materials Direct labor Overhead costs Administration Production setup Quality control Distribution Operating profit Pepper's Products Income Statement For the Month of May Activity Setting up Squeaky $137,000 19,000 70,000 Silent $157,000 20,000 30,000 Performing quality control Distribution Total $294,000 39,000 100,000 Pepper's Products currently uses labor costs to allocate all overhead but is considering implementing an activity-based costing system. After interviewing the sales and production staff, management decides to allocate administrative costs on the basis of direct labor costs but to use the following bases to allocate the remaining overhead. 20,000 45,000 14,400 19,000 $ 56,600 Cost Driver Number of production runs Number of inspections Number of units shipped Activity Level Squeaky Silent. 10 30 80,000 110,000 20 30 Account Sales revenue Direct materials Direct labor Overhead costs: Administration Setting up Performing quality control Distribution Total overhead costs Operating profit (loss) $ $ Squeaky 137,000 $ 19,000 70,000 14,000 Silent 157,000 $ 20,000 30,000 6,000 48,000 $ 107,000 $ Total 294,000 39,000 100,000 20,000 45,000 14,400 19,000 0 155,000 Pepper's Products manufactures and sells two types of chew toys for pets-Squeaky and Silent. In May, Pepper's Products had the following costs and revenues. Sales revenue Direct materials Direct labor Overhead costs Administration Production setup Quality control Distribution Operating profit Pepper's Products Income Statement For the Month of May Activity Setting up Squeaky $137,000 19,000 70,000 Silent $157,000 20,000 30,000 Performing quality control Distribution Total $294,000 39,000 100,000 Pepper's Products currently uses labor costs to allocate all overhead but is considering implementing an activity-based costing system. After interviewing the sales and production staff, management decides to allocate administrative costs on the basis of direct labor costs but to use the following bases to allocate the remaining overhead. 20,000 45,000 14,400 19,000 $ 56,600 Cost Driver Number of production runs Number of inspections Number of units shipped Activity Level Squeaky Silent. 10 30 80,000 110,000 20 30 Account Sales revenue Direct materials Direct labor Overhead costs: Administration Setting up Performing quality control Distribution Total overhead costs Operating profit (loss) $ $ Squeaky 137,000 $ 19,000 70,000 14,000 Silent 157,000 $ 20,000 30,000 6,000 48,000 $ 107,000 $ Total 294,000 39,000 100,000 20,000 45,000 14,400 19,000 0 155,000

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Activity Based Costing The ABC system assigns costs to each activit... View the full answer