Assigning Costs Using Traditional System, ABC System
Momentum Corp., which manufactures skateboards, currently has two product lines, the Standard and the Deluxe, and $29,000 in total overhead.
The company has identified the following information about its overhead activity pools and the two product lines:
|
|
| Quantity/Amount Consumed Standard Line | Quantity/Amount Consumed Deluxe Line |
Activity Pools | Cost Driver | Cost Assigned to Pool | ||
Material handling | Number of moves | $ 1,400 | 100 moves | 75 moves |
Quality control | Number of inspections | $ 5,100 | 1,000 inspections | 875 inspections |
Machine | Number of | $22,500 | 8,000 machine | 12,000 machine |
maintenance | machine hours |
| hours | hours |
Required:
1.Suppose Momentum used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line.
2. Calculate the activity rates for each cost pool in Momentum's ABC system.
3. Calculate the amount of overhead that Momentum will assign to the Standard line if it uses an ABC system.
4. Determine the amount of overhead Momentum will assign to the Deluxe line if it uses an ABC system.
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