Solution-Assign the total manufacturing overhead costs

Assign the total manufacturing overhead costs

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Question - Long Ave Inc. manufactures two products, Standard and Deluxe. Manufacturing overhead costs consist of:

Activity	Overhead Cost
Setting Up Machines	$240,000
Machine Fabrication	$545,000
Inspecting	$470,000
Shipping	$770,000
Purchasing	$335,000

Information on the two products is as follows:

Cost Driver	Standard	Deluxe
Direct Labour Hours	345,000	145,000
Machine Setups	275	460
Machine Hours	33,750	44,300
Inspections	450	285
Parts Shipped	6,800	8,500
Purchasing Orders	400	300

Currently, the controller uses a plant-wide overhead rate based on direct labour hours to assign overhead to the Standard and Deluxe products. The president has heard of activity-based costing and wants to see how the results would differ if this system were used.

Required -

1. Assign the total manufacturing overhead costs to the two products using the current plant-wide method.

2. Assign the total manufacturing overhead costs to the two products using activity-based costing (ABC).

Reference no: EM132488640

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Assign the total manufacturing overhead costs

Reference no: EM132488640

Reference no: EM132488640

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