A new product Zico was recently introduced by Philadelphia Co., in order to complement its other products, Novo and Domo. The accountant used to allocate the indirect cost according to the units produced. With the recent addition of an expanded computer system, Sonata would like to investigate the possibility of implementing ABC. Before making a final decision, management has come to you for advice. You collected the following information regarding manufacturing overhead: Table (1) Mfg. Overhead Mfg. Overhead Costs Allocation bases $ 40,000 $ 45,000 $ 9,000 $ 21,000 Number of set-ups Set-up Ordering materials Handling materials Inspection Number of material orders Number of times material was handled Number of inspection hours $115,000 Table (2) Products Activity Zico Novo Domo Total Number of set-ups 5 20 55 Total Number of material orders 1 7 Total Number of times material was handled 1 17 Total Number of inspection hours Number of units produced 3 10 6,000 3,000 1,000 Required: 1. Calculate the manufacturing overhead allocated for each product under ABC method. 2. Calculate the manufacturing overhead allocated for each product under the traditional costing method.

A new product Zico was recently introduced by Philadelphia Co., in order to complement its other products, Novo and Domo. The accountant used to allocate the indirect cost according to the units produced. With the recent addition of an expanded computer system, Sonata would like to investigate the possibility of implementing ABC. Before making a final decision, management has come to you for advice. You collected the following information regarding manufacturing overhead: Table (1) Mfg. Overhead Mfg. Overhead Costs Allocation bases $ 40,000 $ 45,000 $ 9,000 $ 21,000 Number of set-ups Set-up Ordering materials Handling materials Inspection Number of material orders Number of times material was handled Number of inspection hours $115,000 Table (2) Products Activity Zico Novo Domo Total Number of set-ups 5 20 55 Total Number of material orders 1 7 Total Number of times material was handled 1 17 Total Number of inspection hours Number of units produced 3 10 6,000 3,000 1,000 Required: 1. Calculate the manufacturing overhead allocated for each product under ABC method. 2. Calculate the manufacturing overhead allocated for each product under the traditional costing method.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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