Reference no: EM132846207

Question - Traditional and ABC Indirect Cost Allocation Jones, Inc. has a factory maintenance department that provides different types of maintenance to the company. Currently, the company is allocating the $450,000 total maintenance costs using the 200,000 total direct labor hours. However, management is considering the use of Activity-based costing to allocate indirect costs. Using the following information, allocate the indirect costs in the factory maintenance department to Product Z using the traditional method and Activity-based costing.

Product Z used 3,000 direct labor hours, 30,000 machine hours, 30 setups and 40 machine starts. Determine the maintenance costs that should be allocated to Product Z using traditional overhead allocation and direct labor hours as the cost driver. Determine the maintenance costs allocated to Product Z using ABC with three separate costs drivers as shown above.