Problem
Perdon Corporation manufactures safes-large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of its two products. Part of this analysis involves estimating the amount of overhead to be allocated to each product line. The information shown below relates to overhead.
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Mobile Safes
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Walk-in Safes
|
|
Units planned for production
|
190
|
60
|
|
Material moves per product line
|
300
|
290
|
|
Purchase orders per product line
|
460
|
340
|
|
Direct labor hours per product line
|
810
|
1,710
|
The total estimated manufacturing overhead was $271,000. Under traditional costing (which assigns overhead on the basis of direct labor hours), what amount of manufacturing overhead costs are assigned to:
The total estimated manufacturing overhead of $271,000 was comprised of $179,000 for materials handling costs and $92,000 for purchasing activity costs. Under activity-based costing (ABC):
What amount of materials handling costs are assigned to:
The total estimated manufacturing overhead of $271,000 was comprised of $179,000 for materials handling costs and $92,000 for purchasing activity costs. Under activity-based costing (ABC):
What amount of purchasing activity costs are assigned to:
Compare the amount of overhead allocated to one mobile safe and to one walk-in safe under the traditional costing approach versus under ABC.