RightOn Corporation manufactures travel clocks and watches. The $210,000 in overhead coet ie currently allocated using...
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RightOn Corporation manufactures travel clocks and watches. The $210,000 in overhead coet ie currently allocated using direct labor houre, but the controller has recommended an activity-based costing system using the data that follows: Activity Level Production Setup Material Handling Packing & Shipping Total Overhead # of labor hours Activity Cost Driver Clocks # of Setups # of Parts #units shipped Clocks 35,000 hours 10 setups 18 parts 45,000 units Activity Production Setup Material Handling Packing & Shipping Watches 105,000 hours Additionally, the overhead cost can be divided into two pools: Engineering & Technical Support (ETS) and Building & Maintenance (BM). ETS is responsible for $100,000 and BM for $110,000 of the total overhead. Additionally, in looking at time sheets of the employees, the following distribution of work was determined. Watches 15 setups 36 parts 75,000 units Engineering & Tech Support 60% 10% 30% Building & Maintenance 10% 10% 80% a) (10 points) What is the cost per product (clocks and watches) under the current system? b) (10 Points) Draw the corresponding diagram and find the cost per product (clocks and watches) under an ABC system? c) (5 Points) What do you observe when comparing your solutions in (a) and (b)? RightOn Corporation manufactures travel clocks and watches. The $210,000 in overhead coet ie currently allocated using direct labor houre, but the controller has recommended an activity-based costing system using the data that follows: Activity Level Production Setup Material Handling Packing & Shipping Total Overhead # of labor hours Activity Cost Driver Clocks # of Setups # of Parts #units shipped Clocks 35,000 hours 10 setups 18 parts 45,000 units Activity Production Setup Material Handling Packing & Shipping Watches 105,000 hours Additionally, the overhead cost can be divided into two pools: Engineering & Technical Support (ETS) and Building & Maintenance (BM). ETS is responsible for $100,000 and BM for $110,000 of the total overhead. Additionally, in looking at time sheets of the employees, the following distribution of work was determined. Watches 15 setups 36 parts 75,000 units Engineering & Tech Support 60% 10% 30% Building & Maintenance 10% 10% 80% a) (10 points) What is the cost per product (clocks and watches) under the current system? b) (10 Points) Draw the corresponding diagram and find the cost per product (clocks and watches) under an ABC system? c) (5 Points) What do you observe when comparing your solutions in (a) and (b)?
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Managerial Accounting An Introduction to Concepts Methods and Uses
ISBN: 978-0324639766
10th Edition
Authors: Michael W. Maher, Clyde P. Stickney, Roman L. Weil
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