Use the information in Exercise 5-6A to complete the following requirements. Assume that before shifting to activity-based
Question:
Use the information in Exercise 5-6A to complete the following requirements. Assume that before shifting to activity-based costing, Snowden Industries allocated all overhead costs based on direct labor hours. Direct labor data pertaining to the two decoders follow:
Direct Labor Hours
Decoder P ...................................... 8,000
Decoder Q ..................................... 16,000
Total ............................................ 24,000
Required
a. Compute the amount of overhead cost allocated to each type of decoder when using direct labor hours as the allocation base.
b. Determine the cost per unit for overhead when using direct labor hours as the allocation base and when using ABC. Round your figures to two decimal points.
c. Explain why the per-unit overhead cost is lower for the high-volume product when using ABC.
Step by Step Answer:
Fundamental Managerial Accounting Concepts
ISBN: 978-1259569197
8th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor Yi Tsay, Philip Olds