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Question - Rebecca's Pet Supply Corporation manufactures two models of crates, plastic and wire. The following activity and cost information has been compiled:
Product
Number of Setups
Number of Components
Number of Direct Labor Hours
Plastic
4
12
300
Wire
6
18
200
Overhead costs
$50,000
$75,000
Assume a traditional costing system applies the $125,000 of overhead costs based on direct labor hours.
Required -
a. What is the total amount of overhead costs assigned to the plastic crate?
b. What is the total amount of overhead costs assigned to the wire crate?
Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead.
c. What is the total amount of overhead costs assigned to the plastic crate?
d. What is the total amount of overhead costs assigned to the wire crate?
e. Explain the difference between the costs obtained from the traditional costing system and the activity-based costing system. Which system provides a better estimate of costs? Why?
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