Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: The Deluxe and the Regular. At the beginning of the year 2019, the following data were prepared for this plant: Deluxe Regular Quantity 20 000 80 000 Selling price $90 $75 Unit direct cost $53 $48 In addition, the following information was provided so that overhead costs could be assigned to each product: Activity name Activity Cost Activity driver Deluxe Regular Set-up $200,000 Number of set-up 3 000 5 000 Machining 800,000 Machine hours 10 000 30 000 Engineering 600,000 Engineering hours 100 000 50 000 Packing 100,000 Packing orders 1 000 4 000 Total overhead costs $1,700,000 Required: Calculate the production overhead cost allocated to each product in 2019 using machine-hours as the cost driver (traditional costing system). Calculate the production overhead cost allocated to each product in 2019 using the Activity-based approach to costing system.
Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: The Deluxe and the Regular. At the beginning of the year 2019, the following data were prepared for this plant: Deluxe Regular Quantity 20 000 80 000 Selling price $90 $75 Unit direct cost $53 $48 In addition, the following information was provided so that overhead costs could be assigned to each product: Activity name Activity Cost Activity driver Deluxe Regular Set-up $200,000 Number of set-up 3 000 5 000 Machining 800,000 Machine hours 10 000 30 000 Engineering 600,000 Engineering hours 100 000 50 000 Packing 100,000 Packing orders 1 000 4 000 Total overhead costs $1,700,000 Required: Calculate the production overhead cost allocated to each product in 2019 using machine-hours as the cost driver (traditional costing system). Calculate the production overhead cost allocated to each product in 2019 using the Activity-based approach to costing system.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 27E: Plata Company has identified the following overhead activities, costs, and activity drivers for the...
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Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: The Deluxe and the Regular. At the beginning of the year 2019, the following data were prepared for this plant:
|
|
Deluxe |
Regular |
|
Quantity |
20 000 |
80 000 |
|
Selling price |
$90 |
$75 |
|
Unit direct cost |
$53 |
$48 |
In addition, the following information was provided so that
|
Activity name |
Activity Cost |
Activity driver |
Deluxe |
Regular |
|
Set-up |
$200,000 |
Number of set-up |
3 000 |
5 000 |
|
Machining |
800,000 |
Machine hours |
10 000 |
30 000 |
|
Engineering |
600,000 |
Engineering hours |
100 000 |
50 000 |
|
Packing |
100,000 |
Packing orders |
1 000 |
4 000 |
|
Total overhead costs |
$1,700,000 |
|
|
|
Required:
- Calculate the production overhead cost allocated to each product in 2019 using machine-hours as the cost driver (traditional costing system).
- Calculate the production overhead cost allocated to each product in 2019 using the Activity-based approach to costing system.
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