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Curry Company has two divisions, Eastern Division and Western Division. Curry Company has been allocating overhead based on direct labor hours. For the most recent year, the predetermined overhead rate was $70 per direct labor hour. An activity-based costing analysis of Curry's operations has identified three different cost pools. Data about the cost drivers for each pool for the most recent year given below. Cost Pool Number of Events per Year Cost Pool 2,000 $100,000 1,000 200,000 50 50,000 $350,000 A B с Total The following data relate to cost driver event activity within the two divisions during the most recent year. Eastern Division Western Division Total 500 2,000 1,500 200 800 1,000 30 50 20 3,000 5,000 2,000 Cost Driver A events Cost Driver B events Cost Driver C events Direct labor hours Which of the following statements is correct? If the activity-based costing system had been used in the most recent year in place of the traditional overhead allocation technique, Select one: a. profit for Western Division would have increased by $5,000. b. profit for Western Division would have decreased by $205,000. c. profit for Eastern Division would have decreased by $145,000. * d. profit for Eastern Division would have increased by $5,000. O

Curry Company has two divisions, Eastern Division and Western Division. Curry Company has been allocating overhead based on direct labor hours. For the most recent year, the predetermined overhead rate was $70 per direct labor hour. An activity-based costing analysis of Curry's operations has identified three different cost pools. Data about the cost drivers for each pool for the most recent year given below. Cost Pool Number of Events per Year Cost Pool 2,000 $100,000 1,000 200,000 50 50,000 $350,000 A B с Total The following data relate to cost driver event activity within the two divisions during the most recent year. Eastern Division Western Division Total 500 2,000 1,500 200 800 1,000 30 50 20 3,000 5,000 2,000 Cost Driver A events Cost Driver B events Cost Driver C events Direct labor hours Which of the following statements is correct? If the activity-based costing system had been used in the most recent year in place of the traditional overhead allocation technique, Select one: a. profit for Western Division would have increased by $5,000. b. profit for Western Division would have decreased by $205,000. c. profit for Eastern Division would have decreased by $145,000. * d. profit for Eastern Division would have increased by $5,000. O

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter2: Basic Cost Management Concepts
Section: Chapter Questions
Problem 21E: Ellerson Company provided the following information for the last calendar year: During the year,...
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Curry Company has two divisions, Eastern Division and Western Division. Curry Company has been allocating overhead based on direct labor hours. For the most recent year, the predetermined overhead rate was $70 per direct labor hour. An activity-based costing analysis of Curry's operations has identified three different cost pools. Data about the cost drivers for each pool for the most recent year given below. Cost Pool Number of Events per Year Cost Pool A B 2,000 $100,000 1,000 200,000 50,000 $350,000 с 50 Total The following data relate to cost driver event activity within the two divisions during the most recent year. Eastern Division Western Division Total 500 2,000 800 1,000 20 50 3,000 5,000 Cost Driver A events Cost Driver B events Cost Driver C events Direct labor hours 1,500 200 30 2,000 Which of the following statements is correct? If the activity-based costing system had been used in the most recent year in place of the traditional overhead allocation technique, Select one: a. profit for Western Division would have increased by $5,000. b. profit for Western Division would have decreased by $205,000. c. profit for Eastern Division would have decreased by $145,000. * d. profit for Eastern Division would have increased by $5,000.
Transcribed Image Text:Curry Company has two divisions, Eastern Division and Western Division. Curry Company has been allocating overhead based on direct labor hours. For the most recent year, the predetermined overhead rate was $70 per direct labor hour. An activity-based costing analysis of Curry's operations has identified three different cost pools. Data about the cost drivers for each pool for the most recent year given below. Cost Pool Number of Events per Year Cost Pool A B 2,000 $100,000 1,000 200,000 50,000 $350,000 с 50 Total The following data relate to cost driver event activity within the two divisions during the most recent year. Eastern Division Western Division Total 500 2,000 800 1,000 20 50 3,000 5,000 Cost Driver A events Cost Driver B events Cost Driver C events Direct labor hours 1,500 200 30 2,000 Which of the following statements is correct? If the activity-based costing system had been used in the most recent year in place of the traditional overhead allocation technique, Select one: a. profit for Western Division would have increased by $5,000. b. profit for Western Division would have decreased by $205,000. c. profit for Eastern Division would have decreased by $145,000. * d. profit for Eastern Division would have increased by $5,000.
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