Auburn, Inc.'s overhead costs of $700,000 consist of machining $400,000; inspecting $200,000; and packaging $100,000. Machining works 4,000 hours a year, 500 inspections occur each year, and 1,000 packing order occur each year. Information on the company's two products are as follows: Machining hours Inspections Packing orders Direct labor hours Alpha 1,000 100 350 1,700 Omega 3,000 400 650 1,800 Determine how much overhead is allocated to Omega assuming the use of a single overhead rate (based on direct labor hours) and assuming the use of ABC, respectively.
Auburn, Inc.'s overhead costs of $700,000 consist of machining $400,000; inspecting $200,000; and packaging $100,000. Machining works 4,000 hours a year, 500 inspections occur each year, and 1,000 packing order occur each year. Information on the company's two products are as follows: Machining hours Inspections Packing orders Direct labor hours Alpha 1,000 100 350 1,700 Omega 3,000 400 650 1,800 Determine how much overhead is allocated to Omega assuming the use of a single overhead rate (based on direct labor hours) and assuming the use of ABC, respectively.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Auburn, Inc.'s overhead costs of $700,000 consist of machining $400,000; inspecting $200,000; and
packaging $100,000. Machining works 4,000 hours a year, 500 inspections occur each year, and 1,000
packing order occur each year. Information on the company's two products are as follows:
Machining hours
Inspections
Packing orders
Direct labor hours
Alpha
1,000
100
350
1,700
Omega
3,000
400
650
1,800
Determine how much overhead is allocated to Omega assuming the use of a single overhead rate (based
on direct labor hours) and assuming the use of ABC, respectively.
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