Question

Carlise Corp., which manufactures ceiling fans, currently has two product lines, the Indoor and the Outdoor. Carlise has total overhead of $139,400.

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Carlise Corp., which manufactures ceiling fans, currently has two product lines, the Indoor and the Outdoor. Carlise has total overhead of $139,400.

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

 

Activity Cost PoolsCost DriverCost Assigned
to Pool
Quantity/Amount Consumed by Indoor LineQuantity/Amount Consumed by Outdoor Line
Materials handlingNumber of moves
$20,000
575 moves425 moves
Quality controlNumber of inspections
$82,500
6,000 inspections4,000 inspections
Machine maintenanceNumber of machine hours
$36,900
21,000 machine hours20,000 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.)


Calculate the activity proportions for each cost pool in Carlise’s ABC system. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

 


 

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


 

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



 

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

 

multiple choice


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