Question

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. Mobile Safes Walk-in Safes Units planned for production 200 50 Material moves per product line 300 200 Purchase orders per product line 450 350 Direct labor hours per product line 800 1,700 (a) Your answer is correct. The total estimated manufacturing overhead was $280,000. 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 safe 448 per unit (2) One walk-in safe 3808 per unit

Answer 1

c.

	Traditional costing	Activity based costing
Mobile-safe	$89,600 (200*$448)	$163,500 [200*817.5($480+337.5)]
Walk in safe	190,400 (50*$3,808)	116,500 [50*2,330 ($1,280+1,050)]