Question

Carlise Corp., which manufactures ceiling fans, currently has two product lines, the Indoor and the Outdoor. Carlise has total overhead of $134,768.

Carlise has identified the following information about its overhead activity cost pools and the two product lines:

Activity Cost Pools	Cost Driver	Cost Assigned to Pool				Quantity/Amount Consumed by Indoor Line	Quantity/Amount Consumed by Outdoor Line
Materials handling	Number of moves		$	17,848		560 moves	360 moves
Quality control	Number of inspections		$	84,240		6,000 inspections	4,800 inspections
Machine maintenance	Number of machine hours		$	32,680		29,000 machine hours	14,000 machine hours

Required:
1. Suppose Carlise used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.)

	Overhead Assigned Indoor Model Outdoor Model Total

2. Calculate the activity proportions for each cost pool in Carlise's ABC system. (Round your answers to 2 decimal places.)

	Activity Proportions Indoor Line Outdoor Line Materials Handling % % per Move Quality Control % % per Inspection Machine maintenance % % per Machine Hour

3. Calculate the amount of overhead that Carlise will assign to the Indoor line if it uses an ABC system. (Round your intermediate calculations to 2 decimal places and round your final answers to the nearest whole dollar amount.)

	Indoor Model Materials Handling Quality Control Machine maintenance Total Overhead Assigned

4. Determine the amount of overhead Carlise will assign to the Outdoor line if it uses an ABC system. (Round your intermediate calculations to 2 decimal places and round your final answers to the nearest whole dollar amount.)

	Outdoor Model Materials Handling Quality Control Machine maintenance Total Overhead Assigned

5. Compare the results for a traditional system with an ABC system. Which do you think is more accurate?

• Traditional System

• ABC System

Answer 1

1. Suppose Carlise used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.)

	Overhead Assigned Indoor Model 134768/43000*29000 = 90890 Outdoor Model 43878 Total 134768

2. Calculate the activity proportions for each cost pool in Carlise's ABC system. (Round your answers to 2 decimal places.)

	Activity Proportions Indoor Line Outdoor Line Materials Handling 560/920 = 60.87 % 39.13 % per Move Quality Control 6000/10800 = 55.56% % 44.44 % per Inspection Machine maintenance 67.44 % 32.56 % per Machine Hour

3. Calculate the amount of overhead that Carlise will assign to the Indoor line if it uses an ABC system. (Round your intermediate calculations to 2 decimal places and round your final answers to the nearest whole dollar amount.)

	Indoor Model Materials Handling 10864 Quality Control 46800 Machine maintenance 22040 Total Overhead Assigned 79704

4. Determine the amount of overhead Carlise will assign to the Outdoor line if it uses an ABC system. (Round your intermediate calculations to 2 decimal places and round your final answers to the nearest whole dollar amount.)

	Outdoor Model Materials Handling 6984 Quality Control 37440 Machine maintenance 10640 Total Overhead Assigned 55064

5. Compare the results for a traditional system with an ABC system. Which do you think is more accurate

• ABC System