Question

Ch 24-2

Homework: Chapter 24 HomeWUIR Score: 0 of 18 pts P24-27A (similar to) Zol 210 complete HW Score: 0%, 0 of 38 Question Help Corbed Pharmaceuticals manufacturers an over the counter alergy medication The company ses botnlage commercial containers of 1000 capsules to health care faches and travel packs of 20 capsules lo shops in sports, translations and hotels The following information has been developed to determine if an activity-based costing system would be beneficial Head the tours Requirement 1. Corbert's one single plant de overhead alocation rate costing system allocated indirect costs to products at $140.00 per machine hour compule the total direct contacted to the commercial containers and to the travel packs under the orginal system. Then compute the direct cost per unit for each produc Round to two decimal places. Select the form and then ermore amount to compute the indirect cost per un for each product (Abbreviation und manufacturing Round dollar amounts Choose from any drop-down list and then ack Check Answer.

Answer 1

1	Indirect costs allocated=Plant wide overhead allocation rate*Machine hours used
	Commercial containers:
	Indirect costs allocated=140*2250=$ 315000
	Travel packs:
	Indirect costs allocated=140*510=$ 71400
	Indirect cost per unit=Indirect costs allocated/Units produced
					Commercial containers	Travel packs
	Indirect costs allocated			a	315000	71400
	Units produced			b	3000	51000
	Indirect cost per unit			a/b	105	1.4
2	Predetermined overhead allocation rate=Indirect cost for the activity/Quantity of allocation base
					Materials handling	Packaging	Quality assurance
	Estimated indirect costs			a	96000	210000	114000
	Quantity of allocation base			b	24000	3000	1900
	Predetermined overhead allocation rate			a/b	4	70	60
					Per kilo	Per hour	Per sample
3	Activity-based costs per unit:
					Commercial container
	Materials handling				54000
	(Weight in kilos*Predetermined OH allocation rate)				(13500*4)
	Packaging				157500
	(Machine hours*Predetermined OH allocation rate)				(2250*70)
	Quality assurance				36000
	(No.of samples*Predetermined OH allocation rate)				(600*60)
	Total activity-based costs			a	247500
	Number of units			b	3000
	Activity-based cost per unit			a/b	82.5
					Travel packs
	Materials handling				20400
	(Weight in kilos*Predetermined OH allocation rate)				(5100*4)
	Packaging				35700
	(Machine hours*Predetermined OH allocation rate)				(510*70)
	Quality assurance				45900
	(No.of samples*Predetermined OH allocation rate)				(765*60)
	Total activity-based costs			a	102000
	Number of units			b	51000
	Activity-based cost per unit			a/b	2
4	Relative to activity-based costing (ABC),the traditional system over-costs the commercial containers and under-costs the travel packs
	The traditional system allocates overhead costs solely on machine hours.
	Activity-based costing (ABC) recognizes that although commercial containers require fewer more machine hours per unit than travel packs,they do not require the same proportion of material handling and quality assurance