Reference no: EM132814400
Question - Activity-Based Costing - Answer the following questions using the information below:
Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year:
Cost Pool Overhead Costs Cost driver Activity level
Supervision of direct?labor $320,000
Direct?labor?hours 800,000
Machine maintenance $120,000
Machine hours 960,000
Facility rent $200,000
Square?meters?of area 100,000
Total overhead costs $640,000
The accounting records show the Mossman Job consumed the following resources:
Cost driver Actual level
Direct?labour-hours 200
Machine-hours 1,600
Square?meters?of area 50
Required -
1. If Gregory Enterprises uses a simple cost system based on direct labor hours,?then what amount of indirect costs will be allocated to the Mossman job?
2. What is the activity rate for machine maintenance costs?
3. If Gregory Enterprises uses an ABC?system?, what amount of indirect costs will be allocated to the Mossman job?
4. When selling prices are based on costs assigned using the single cost driver, direct labor?hours, then would the Mossman job be overbilled or?underbilled?
5. What are the benefits of?ABC?