When Mary realized how small the margin was for her main product, she was aghast. She...

  

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When Mary realized how small the margin was for her main product, she was aghast. She knew the company had already achieved significant direct materials savings by partnering with its supplier. The consultant brought in last year further streamlined labor usage, bringing her to best-in-class levels for labor. The only other area to look at was overhead. Total MOH costs this coming year are estimated at $2,230,000. Three key activities are the primary causes of total MOH. They are identified as follows, including the budgeted cost, budgeted cost driver, and budgeted cost driver quantities for each. Activity Budgeted Cost Cutting Fabrication Inspection Total $710,000 1,200,000 320,000 $2,230,000 Budgeted Quantity Of Cost Driver 71,000 machine hours 100.000 direct labor hours 20,000 inspection hours Main Product's Use of Cost Driver 7,700 21,000 2,000 (c) - Your answer is partially correct Compare the allocations using the plant-wide rate versus the activity-based rates Difference S 188000 Do the ABC allocations alleviate any of Mary's concerns about the low margin of this product? When Mary realized how small the margin was for her main product, she was aghast. She knew the company had already achieved significant direct materials savings by partnering with its supplier. The consultant brought in last year further streamlined labor usage, bringing her to best-in-class levels for labor. The only other area to look at was overhead. Total MOH costs this coming year are estimated at $2,230,000. Three key activities are the primary causes of total MOH. They are identified as follows, including the budgeted cost, budgeted cost driver, and budgeted cost driver quantities for each. Activity Budgeted Cost Cutting Fabrication Inspection Total $710,000 1,200,000 320,000 $2,230,000 Budgeted Quantity Of Cost Driver 71,000 machine hours 100.000 direct labor hours 20,000 inspection hours Main Product's Use of Cost Driver 7,700 21,000 2,000 (c) - Your answer is partially correct Compare the allocations using the plant-wide rate versus the activity-based rates Difference S 188000 Do the ABC allocations alleviate any of Mary's concerns about the low margin of this product?

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ANSWERS a To determine the cost allocation of the overhead activities to the main product using acti... View the full answer