Zain Corporation manufactures two models of grooming stations, a standard and a deluxe model. The following activity
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Question:
Zain Corporation manufactures two models of grooming stations, a standard and a deluxe model. The following activity and cost information has been compiled:
Number of Number of Number of
Product Setups Components Direct Labor Hours
Standard 13 30 650
Deluxe 7 90 350
Overhead costs $40,000 $120,000
Instructions: (3 marks each)
- Assume a traditional costing system applies the $160,000 of overhead costs based on direct labor hours.
- What is the total amount of overhead costs assigned to the standard model?
(13/20 x 40000)=26000
- What is the total amount of overhead costs assigned to the deluxe model?
(7/20 x40000)= 14000
- Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead.
- What is the total amount of overhead costs assigned to the standard model?
- What is the total amount of overhead costs assigned to the deluxe model?
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