Reference no: EM131753957
An activity based costing system is being considered at Malok to assign products overhead costs; these overhead costs are currently assigned strictly by number of units produced. First, the two overhead costs of Supervisory expense and Heating and Cooling expense would be allocated to three activity cost pools - Handling, Painting, and Other - based on resource consumption. The information used to perform these allocations is below:
Overhead Costs:
- Supervisory expense: $1,600,000
- Heating and Cooling expense: $600,000
Distribution of Resource Consumption across Activity Cost Pools:
| Overhead Cost |
Activity Cost Pools |
| Handling |
Painting |
Other |
| Supervisory expense |
0.10 |
0.40 |
0.50 |
| Heating and Cooling expense |
0.20 |
0.30 |
0.50 |
In the second stage, Handling costs would be assigned to products using orders filled and Painting costs would be assigned to products using the number of direct labor hours. The costs in the Other activity pool would not be assigned to products. Activity data for the company's two products is as follows:
| orders filled |
direct labor hours |
Units Produced |
| Product BA-10: |
10,500 |
11,500 |
9,400 |
| Product XR-9: |
26,500 |
10,000 |
3,300 |
| Total: |
37,000 |
21,500 |
12,700 |
PART A: How much overhead cost would be assigned to the Painting activity cost pool under activity based costing in the first stage of allocation?Answer
PART B: The activity rate for the Painting activity cost pool under activity based costing would be closest to:Answer$38.14$3.24$2.79$20.54$4.32
PART C: To the nearest dollar, how would the overhead cost assigned to Product XR-9 change under activity based costing compared to their current accounting methods?
There would be Answer in assigned overhead under activity based costing, and the amount of the change would be $Answer. (Enter 0 for amount if choosing 'no change' for the direction.)