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Paul White has been studying his department’s profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company’s approach to allocating overhead to products based on machine hours. The current department overhead budget of $ 1,142,940 is based on 38,098 machine hours. In an initial analysis of overhead costs, Paul has identified the following activity cost pools.

Paul White has been studying his department’s profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company’s approach to allocating overhead to products based on machine hours. The current department overhead budget of $ 1,142,940 is based on 38,098 machine hours. In an initial analysis of overhead costs, Paul has identified the following activity cost pools.

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter4: Job-order Costing And Overhead Application
Section: Chapter Questions
Problem 34BEB: Use the following information for Brief Exercises 4-34 and 4-35: Sanjay Company manufactures a...
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Paul White has been studying his department’s profitability reports for the past six months. He has just completed a managerial accounting course and is beginning to question the company’s approach to allocating overhead to products based on machine hours. The current department overhead budget of $ 1,142,940 is based on 38,098 machine hours. In an initial analysis of overhead costs, Paul has identified the following activity cost pools.

Cost Pool Expected Cost Expected Activities Product assembly $ 729,000 40,500 machine hours Machine setup and calibration 291,400 4,700 setups Product inspection 57,540 1,370 batches Raw materials storage 65,000 260,000 pounds $ 1,142,940 Paul White is taking the next step in his exploration of activity-based costing and wants to examine the overhead costs that would be allocated to two of the department's four products. He has gathered the following budget information about each product. Driver Usage Component 3F5 Component T76 Machine hours 1,040 10,800 Setups 40 22 Batches 20 10 Pounds of raw materials 10,000 10,000
Transcribed Image Text:Cost Pool Expected Cost Expected Activities Product assembly $ 729,000 40,500 machine hours Machine setup and calibration 291,400 4,700 setups Product inspection 57,540 1,370 batches Raw materials storage 65,000 260,000 pounds $ 1,142,940 Paul White is taking the next step in his exploration of activity-based costing and wants to examine the overhead costs that would be allocated to two of the department's four products. He has gathered the following budget information about each product. Driver Usage Component 3F5 Component T76 Machine hours 1,040 10,800 Setups 40 22 Batches 20 10 Pounds of raw materials 10,000 10,000
(a) Calculate the total overhead allocated to each component under the traditional method using machine hours as the overhead application base. Component 3F5 Component T76 Total Overhead allocated (b) Calculate the total overhead allocated to each component under activity-based costing. (Round overhead rates to 2 decimal places, eg. 5.27 and round final answers to O decimal places, e.g. 5,275.) Component 3F5 Component T76 2$ Total Overhead allocated %24
Transcribed Image Text:(a) Calculate the total overhead allocated to each component under the traditional method using machine hours as the overhead application base. Component 3F5 Component T76 Total Overhead allocated (b) Calculate the total overhead allocated to each component under activity-based costing. (Round overhead rates to 2 decimal places, eg. 5.27 and round final answers to O decimal places, e.g. 5,275.) Component 3F5 Component T76 2$ Total Overhead allocated %24
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