Question

Carlise Corp, which manufactures ceiling fans, currently has two product lines, the Indoor and the Outdoor Carlise has total overhead of $124,249 Carlise has identified the following information about its overhead activity cost pools and the two product lines Kost Activity Cost Pools Materials handling Quality control Machine maintenance Cost Driver Number of moves Number of inspections Number of machine hours Quantity/Amount Assigned Quantity/Amount Consumed by Outdoor to Pool Consumed by Indoor Line Line $ 18,139 59e moves 380 moves $ 75,710 6,480 Inspections 4,909 inspections $ 30,400 25,000 machine hours 13, 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 2. Calculate the activity proportions for each cost pool in Carlise's ABC system (Round your answers to 2 decimal places.) In Line Activity Proportion Outdoor Line S per Move Material Handling Quality Control Machine maintenance per inspection per Machine Hour

Answer 1

Solution: Predetermined overhead rate = 124,249 / 38,000 = $3.2697 per machine hour Amount of overhead allocated to Indoor Line = 3.2697 x 25,000 = $81743. Amount of overhead allocated to Outdoor Line = 3.2697 x 13,000 = $42,506. Particulars Indoor Line Materials Handling 60.82% (590/970) Quality Control 56.64% (6,400/11,300) Machine Maintenan 65.79% 25,000/38,000) Outdoor Line 39.18% (380/970) 43.36% (4,900/11,300) 134.21% (25,000/38,000) per move per inspection per machine hour Particulars Materials Handling $ Quality Control Machine Maintenant $ Total amount $ Indoor Line 11,032.14 (18,139*60.82%) 42,882.14 (75,710*56.64%) 20,000.16 (30,400*65.79%) 73,914 Particulars Materials Handling $ Quality Control Machine Maintenant $ Total amount Outdoor Line 7,106.86 (18,139*39.18%) 32,827.86 |(75,710*43.36%) 10,399.84 (30,400*34.21%) 50,335

The ABC system is more accurate since it traces overhead activities to each product line.