Should the company follow the controllers recommendations

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Reference no: EM13862739

Problem: Activity-based costing and versus traditional costing

 

C & W Corporation manufactures travel clocks and watches. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended using an activity-based costing system based on the following data:

 

Activity

Cost Driver

Cost

Activity Level

Tray& Clocks

Watches

Production setup

Setups

$100,000

20

30

Material handling and requisition

Parts

30,000

24

36

Packaging and shipping

Units shipped

60,000

80,000

120,000

Total overhead


$190,000



 

a. Compute the amount of the total overhead allocated to each of the products under activity based costing.

b. Compute the amount of total overhead allocated to each of the products using labor-hours as the allocation base. Assume labor-hours required to assemble each unit are .5 per travel clock and 1.0 per watch, and that 80,000 travel clocks and 120,000 watches were produced.

c. Should the company follow the controller's recommendations?

Reference no: EM13862739

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