EcoFabrics has budgeted overhead costs of $945,000. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be 450,000 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (cost driver is machine hours) and design (cost driver is number of setups). Overhead allocated to the cutting cost pool is $360,000, and $585,000 is allocated to the design cost pool.Additional information related to these pools is as follows:Machine hours wool: 100,000Number of set ups wool: 1,000Machine hours cotton: 100,000Number of set ups cotton: 500Machine hours total: 200,000Number of setups total: 1,500The amount of overhead allocated to the wool product line and the cotton product line using activity-based costing & traditional approach is as follows:ABC wool: $570,000Traditional wool: $472,500ABC cotton: $375,000Traditional cotton: $472,500Required:How does allocation using the traditional approach compare with the amount allocated using ABC?
Solved
Show answers
More tips
- F Family and Home How to Keep Your Home Warm: Tips and Tricks...
- D Dating, Love, Relationships Does a Person s Character Depend on the Color of Their Eyes?...
- O Other Childhood Fears: What Many of Us Experienced...
- H Health and Medicine Simple and Effective: How to Get Rid of Cracked Heels...
- O Other How to Choose the Best Answer to Your Question on The Grand Question ?...
- L Leisure and Entertainment History of International Women s Day: When Did the Celebration of March 8th Begin?...
- S Style and Beauty Intimate Haircut: The Reasons, Popularity, and Risks...
- A Art and Culture When Will Eurovision 2011 Take Place?...
- S Style and Beauty How to Choose the Perfect Hair Straightener?...
- F Family and Home Why Having Pets at Home is Good for Your Health...
Answers on questions: Business
- B Business Who likes my profile picture...
- B Business In an attempt to determine the population size of catfish is sinister makenzie s fish pond located at Longo Lagos ibadanExpressway the First Capture after several dips of hands...
- B Business Analyze the graph. If a business moves from P1 to P2, how could a competitor respond without making the same decision? (1 point) A. by lobbying the government to subsidize the...
- B Business Smart Company prepared its annual financial statements dated December 31. The company used the FIFO inventory costing method, but it failed to apply LCM to the ending inventory....
- B Business Why would a monopolistic competitive business advertise its product? (1 point) A. to attract investors B. to establish price ceilings C. to differentiate from similar products...
- B Business The payroll register of Heritage Co. indicates $4,200 of social security withheld and $1,050 of Medicare tax withheld on total salaries of $70,000 for the period. Earnings of $12,000...
- B Business According to liquidity preference theory, if the price level a. fell, the interest rate would fall, and induce investment spending to fall. b. rose, the interest rate would fall,...
- B Business Vernon inc. makes a smartphone case that includes a battery that extends the operating life of an iphone. the manufacturing costs per unit include $18 direct materials, $21 direct...
- M Mathematics Find the difference between 12/13 and 5/13. express your answer in lowest terms....
- S Social Studies What term identifies the cultural norm that assumes that everyone is heterosexual? ?...
Ответ:
The main advantage of using ABC costing method is that it is more exact than traditional costing, and overhead costs are generally allocated on different basis (cost drivers) which results in a more fair distribution.
In this case, overhead costs allocated based solely on direct labor hours might be over or under stated since certain manufacturing procedures might require a lot of labor but few machines, while others might require few labor and a lot of machines.
Cutting is done mostly by machines while design is done mostly by employees. Allocating cutting overhead costs based on machine hours makes sense. Since both wool and cotton require the same amount of machine hours, cutting costs are allocated equally between them.
On the other hand, design is carried out by employees, so allocating design costs based on set ups (which is also carried out by employees) makes sense. That is why most of design costs are allocated to wool (wool requires 67% of setups).
Before under the traditional method, overhead costs were allocated evenly, but once we start allocating them based on more real cost drivers, the total amounts change.
Ответ:
Employees, owner of the business and investors
Explanation:
Family decisions are biased and they can change business decision over the course of period. In the above scenario, graters family has decided to take a long term view of the business rather than short term profit will greatly affect the employees, owner of the business and investors. Family decisions can affect a stakeholder that is why it is recommended that family and business should remain apart.