Question

		Type of Textbook
Activity (Cost)	Cost Driver	Deluxe			Moderate			Economy
Machine maintenance ($360,000)	Number of machine hours	300			900			1,200
Setups ($630,000)	Number of setups	30			15			5
Packing ($162,000)	Number of cartons	10			30			50
Photo development ($504,000)	Number of pictures	4,000			2,000			1,000

Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include pictures only in chapter openings.

Required

1. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books during the prior year:

Deluxe	Moderate	Economy
50,000	150,000	200,000

Determine the overhead cost per book for each book type.

2. Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced with an activity-based costing system.

(For all requirements, round your answers to 2 decimal places.)

Deluxe	Moderate	Economy
a.	Cost per book (volume-based allocation)
b.	Cost per book (activity-based costing)

This is a numeric cell, so please enter numbers only.

Answer 1

Answer Page No 0 uuu N @ Volume-based allocation Pre determined overhead rate Estimated overhead cost Estimated total machine bowrs $360,000 + $630,000 + $162,000+ $504000 300 +900 + 1200 #1,656,000 $690 2400 Deluxer coof por book Total overhead cool 300X$690 Books produced 50,000 $207,000 $4.14 50,000 900 X 690 $ 621000 Moderate - coof book por - ¢ 4:14 150,000 150,000 per book 1200X690 64.14 200,000 © Activila based costing cost 360,000 Machine maintenance rate Total activity 300 + 900 +1200 $150 rate $630,000 30+15+5 $162000 $1800 10 +30+ 50 Economy - cost - Set up $ 12600 Packing vrate

Page No @ $540,000 Photo development rate = 4000+ 2000 + 1000 $ 72 Deluxe Machine maintenance $150 X 300 = $45000 Set up $12600 X 30 $378000 Packing - $ 1800 x 10 $18000 Photo del clopment - $49X4000 = $288,000 Total overhead cost 45000 + 378000 + 18000 + 288000 $729000 cost per book = 729000 50,000 $14.58 Moderate Machine maintenance $150X900 - $135000 Set up = $12600 x 15 = $189,000 Packing - $1800 x 30 = $54000 Photo development = $ 72 x 2000 - $144000 Total overbead cost = 135000+ 189000 + 54000 +144000 - $522000 cost $522000 book $3.48 per 150,000

Set up = Economy Page: No Machine maintenance $150 X 1200 $ 180,000 $12600 x 5 $63000 Packing = $ 1800 50 $90,000 Photo development $70 X 1000 = Total overhead costs 180 000 + 63000+ 90000 + 70000 $ 405000 Cost per books $405000 $2.03 300,000 $42000 $4014 @coof per book ( volume based allocation +4:14 cost per book [activily based costing ) $14158 $4.14 $2.03 $3:48