Question

Exercise 17-5 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. Units planned for production Material moves per product line Purchase orders per product line Direct labor hours per product line Mobile Safes 200 300 450 800 Walk-in Safes 55 270 350 1,710 Your answer is partially correct. Try again. The total estimated manufacturing overhead was $261,000. Under traditional costing (which assigns overhead on the basis of direct labor hours), what amount of manufacturing overhead costs are assigned to: (Round answers to 2 decimal places, e.g. 12.25.) 308.11 per unit (1) One mobile safe (2) One walk-in safe 1 3232.96 per unit

Answer 1

1) Manufacturing overhead allocation under traditional method:-

a) one mobile safe- 415.94 per unit

b) one walk in safe- 3232.96 per unit

2) Material handling cost per unit of product as per ABC:-

a) one mobile safe- 428.95 per unit

b) one walk in safe- 1403.83 per unit

3) Purchasing activity cost per unit of product as per ABC:-

a) one mobile safe- 275.63 per unit

b) one walk in safe- 1002.27 per unit

4) Total overhead allocation comparison in traditional and ABC method:-

Particulars Traditional Costing ABC

Mobile safe 415.94 per unit 704.58 per unit

walk in safe 3232.96 per unit 2406.1 per unit