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 200 310 450 800 Walk-in Safes 60 190 350 1,710 The total estimated manufacturing overhead was $277,000. 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.) (1) One mobile safet per unit (2) One walk-in safes per unit LINK TO TEXT The total estimated manufacturing overhead of $277,000 was comprised of $166,000 for materials handling costs and $111,000 for purchasing activity costs. Under activity-based costing (ABC): (Round answers to 2 decimal places, e.g. 12.25.) What amount of materials handling costs are assigned to: (a) One mobile safe $ per unit (b) One walk-in safe $ per unit LINK TO TEXT The total estimated manufacturing overhead of $277,000 was comprised of $166,000 for materials handling costs and $111,000 for purchasing activity costs. Under activity-based costing (ABC): (Round answers to 2 decimal places, e.g. 12.25.) What amount of purchasing activity costs are assigned to: per unit (a) One mobile safe $ (b) One walk-in safe per unit LINK TO TEXT Compare the amount of overhead allocated to one mobile safe and to one walk-in safe under the traditional costing approach versus under ABC. (Round answers to 2 decimal places, e.g. 12.25.) Traditional Costing Activity-Based Costing Mobile safe Walk-in safe

Answer 1

Predetermined overhead rate is = Total estimated manufacturing overhead/Total direct labor hours Predetermined overhead rate is = (277000/(800+1710)) Predetermined overhead rate is = $ 110.3585657 Predetermined overhead rate is = $ 110.36/. 1) Manufacturing overhead cost assigned to One mobile safe is = (800*110.36) Manufacturing overhead cost assigned to One mobile safe is - $ 88,288/. Per unit is = (88288/200) Per unit is = $ 441.44). 2) Manufacturing overhead cost assigned to One walk-in safe is = (1710*110.36) Manufacturing overhead cost assigned to One walk-in safe is = $ 188,715.60/. Per unit is = (188715.60/60) Per unit is = $ 3,145.26/. Material handling cost per product line = (166000/(310+190)) Material handling cost per product line = $ 332/. a) Per unit of One mobile safe is = (332*310)/200 Per unit of One mobile safe is = $ 514.60/. b) Per unit of One walk-in safe is = (332*190)/60 Per unit of One walk-in safe is = $ 1,051.33/. Purchasing cost per product line is = (111000/(450+350)) Purchasing cost per product line is - $ 138.75/. a) Per unit of One mobile safe is = 138.75*450)/200 Per unit of One mobile safe is = $ 312.1875/. b) Per unit of One walk-in safe is = (138.75*350)/60 Per unit of One walk-in safe is = $ 809.3750/. Overhead allocated to each of safes :- Traditional Activity- Based Particulars Costing Costing 88,288 Mobile safe (441.44*200) Material handling activity (514.6*200) Purchasing activity (312.1875-200) 1,02,920 62,438 1,65,358 88,288 1,88,716 Walk in Safe (3145.26*60) Material handling activity (1051.33*60) Purchasing activity (809.375*60) 63,080 48,563 1,11,642 1,88,716