Carter, Incorporated, produces two products, Product A and Product B. Carter uses a traditional volume-based costing system in whichdirect labor hours are the allocation base. Carter is considering switching to an ABC system by splitting its manufacturing overheadcost across three activities: Design, Production, and Inspection. The cost of each activity and usage of the cost drivers are as follows:Activity Pool (Driver)Design (engineering hours)Production (direct labor hours)Inspection (batches)Cost of Pool$ 300,000500,000200,000300,000100Carter manufactures 10,000 units of Product A and 7,500 units of Product B per month.Required:a. Calculate the predetermined overhead rate under the traditional costing system.b. Calculate the activity rate for Design.c. Calculate the activity rate for Machining.d. Calculate the activity rate for Inspection.e. Calculate the indirect manufacturing costs assigned to each unit of Product A under the traditional costing system.f. Calculate the indirect manufacturing costs assigned to each unit of Product B under the traditional costing system.g. Calculate the indirect manufacturing costs assigned to each unit of Product A under the ABC system.h. Calculate the indirect manufacturing costs assigned to each unit of Product B under the ABC system.i. Which product is undercosted and which is overcosted under the volume-based cost system compared to ABC?Usage byProduct A200100,000300Usage byProduct B300Complete this question by entering your answers in the tabs below.Predetermined Overhead RateRequired A Required B Required C Required D Required E Required FCalculate the predetermined overhead rate under the traditional costing system.Note: Round your answer to 2 decimal places.< Required ARequired G Required H Required IRequired B >

Name: Carter, Incorporated, produces two products, Product A and Product B.
Uploaded: 2024-03-20T06:32:49.000Z
Channel: Bartleby
Description: Carter, Incorporated, produces two products, Product A and Product B. Carter uses a traditional volume-based costing system in whichdirect labor hours are the allocation base. Carter is considering switching to an ABC system by splitting its manufac

The pre-determined overhead rate is calculated as the estimated overhead costs divided by the…

Business

Accounting

Carter, Incorporated, produces two products, Product A and Product B. Carter uses a traditional volume-based costing system in which direct labor hours are the allocation base. Carter is considering switching to an ABC system by splitting its manufacturing overhead cost across three activities: Design, Production, and Inspection. The cost of each activity and usage of the cost drivers are as follows: Usage by Product A 200 100,000 300 Usage by Product B 300 Cost of Pool $ 300,000 500,000 200,000 300,000 100 Carter manufactures 10,000 units of Product A and 7,500 units of Product B per month. Required: a. Calculate the predetermined overhead rate under the traditional costing system. b. Calculate the activity rate for Design. Activity Pool (Driver) Design (engineering hours) Production (direct labor hours) Inspection (batches) c. Calculate the activity rate for Machining. d. Calculate the activity rate for Inspection.

Carter, Incorporated, produces two products, Product A and Product B. Carter uses a traditional volume-based costing system in which direct labor hours are the allocation base. Carter is considering switching to an ABC system by splitting its manufacturing overhead cost across three activities: Design, Production, and Inspection. The cost of each activity and usage of the cost drivers are as follows: Usage by Product A 200 100,000 300 Usage by Product B 300 Cost of Pool $ 300,000 500,000 200,000 300,000 100 Carter manufactures 10,000 units of Product A and 7,500 units of Product B per month. Required: a. Calculate the predetermined overhead rate under the traditional costing system. b. Calculate the activity rate for Design. Activity Pool (Driver) Design (engineering hours) Production (direct labor hours) Inspection (batches) c. Calculate the activity rate for Machining. d. Calculate the activity rate for Inspection.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Matt Company uses activity-based costing. The company has two products: A and B. The annual…

A: The objective of the question is to calculate the cost per unit of Product A using activity-based…

Q: Maxey & Sons manufactures two types of storage cabinets-Type A and Type B-and applies manufacturing…

A: 1. Unit manufacturing cost can be calculated by adding up all the direct material cost, direct labor…

Q: Kunkel Company makes two products and uses a conventional costing system in which a single plantwide…

A: Conventional overhead allocation system distributes overhead costs based on a single allocation…

Q: TGM Company has two products: A and B. The company estimated MOH cost and expected activity for each…

A: 1) Activity rate for activity 3 = Estimated MOH in activity 3/Total expected activity =…

Q: Weirick, Incorporated, manufactures and sells two products: Product T8 and Product P4. The company…

A: Activity based costing is one of cost allocation method, under which all overhead costs or indirect…

Q: XYZ Company manufactures and distributes two products, M and XY. Overhead costs are currently…

A: Total overhead per unit is calculated by dividing the total overhead by the number of units.

Q: Yalland Manufacturing Company makes two different products, M and N. The company’s two departments…

A: Direct costs are those costs that can be allocated directly to the product. Indirect costs are those…

Q: Vattes, Incorporated, manufactures and sells two products: Product 15 and Product U1. Data…

A: From the given information, Total overhead = $268,698+ $37,324+ $633,895 = $939,917 Overhead applied…

Q: Pan & Smith LLP, a consulting firm, uses an activity-based costing in which there are three activity…

A: Overhead means the cost incurred indirect in factory for the production of goods. Manufacturing…

Q: The company is considering using a two-stage cost allocation system and wants to assess the effects…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Spates, Incorporated, manufactures and sells two products: Product H2 and Product E0. Data…

A: Predetermined Overhead Rate :— It is the rate used to allocate manufacturing overhead cost to cost…

Q: Gable Company uses three activity pools. Each pool has a cost driver. Information for Gable Company…

A: Activity Rate :— It is the rate used to allocate manufacturing overhead cost to cost object under…

Q: Harrison Company makes two products and uses a traditional costing system in which a single…

A: Manufactuing overhead may be allocated using traditional costing or activity-based costing.…

Q: Jordan Company produces commercial gardening equipment. Since production is highly automated, the…

A: Answer:- Overhead refers to the continuing expenditures of running a firm, although it does not…

Q: Ayala Inc. has conducted the following analysis related to its product lines, using a traditional co…

A: Traditional costing income is a standard technique for external financial reporting that is required…

Q: Disc uses activity-based costing. Two of Disc's production activities are kitting (assembling the…

A: Predetermined rate = Estimated cost / Estimated activity

Q: Allure Company manufactures and distributes two products, M and XY. Overhead costs are currently…

A: Predetermined Overhead Rate :— It is the rate used to allocate manufacturing overhead cost to cost…

Q: an activity-based cos Estimated Expected Activity Activity Measures Overhead Cost Activity Cost…

A: The computation of activity rate for the Machine Setups activity cost pool is shown below:-…

Q: Hakara Company has been using direct labor costs as the basis for assigning overhead to its many…

A: ACTIVITY BASED COSTINGActivity Based Costing is a Powerful tool for measuring…

Q: МОН with a hat is the Me Activ

A: Activity based costing is the recent popular technique in Cost Accounting…

Q: Windhoek Manufacturers produces two products, Amber and Black. The following cost estimates have…

A: Throughput accounting gives managers information which helps them in making the decisions that will…

Q: Chrzan, Incorporated, manufactures and sells two products: Product EO and Product NO. Data…

A: In the activity-based costing, the manufacturing overhead costs are allocated or assigned to the…

Q: Bluefield Corporation has two product lines, A and B. Bluefield has identified the following…

A: Predetermined Overhead Rate:— It is the rate used to allocate manufacturing overhead cost to cost…

Q: □ Shalom Company uses three activity pools to apply overhead to its products. Each activity has a…

A: Activity Rate :— It is the rate used to allocate overhead cost to cost object under activity based…

Q: The Oswell Company manufactures products in two departments: Mixing and Packaging. The company was…

A: Predetermined Overhead Rate:— It is the rate used to allocate manufacturing overhead cost to cost…

Q: Helm Corporation uses an activity-based costing system with three activity cost pools. The company…

A: Calculation of How much cost, in total, would be allocated in the first-stage allocation to the…

Concept explainers

Process Costing

Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure. 

Job Costing

Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.

ABC Costing

Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.

Topic Video

Question

Carter, Incorporated, produces two products, Product A and Product B. Carter uses a traditional volume-based costing system in which
direct labor hours are the allocation base. Carter is considering switching to an ABC system by splitting its manufacturing overhead
cost across three activities: Design, Production, and Inspection. The cost of each activity and usage of the cost drivers are as follows:
Activity Pool (Driver)
Design (engineering hours)
Production (direct labor hours)
Inspection (batches)
Cost of Pool
$ 300,000
500,000
200,000
300,000
100
Carter manufactures 10,000 units of Product A and 7,500 units of Product B per month.
Required:
a. Calculate the predetermined overhead rate under the traditional costing system.
b. Calculate the activity rate for Design.
c. Calculate the activity rate for Machining.
d. Calculate the activity rate for Inspection.
e. Calculate the indirect manufacturing costs assigned to each unit of Product A under the traditional costing system.
f. Calculate the indirect manufacturing costs assigned to each unit of Product B under the traditional costing system.
g. Calculate the indirect manufacturing costs assigned to each unit of Product A under the ABC system.
h. Calculate the indirect manufacturing costs assigned to each unit of Product B under the ABC system.
i. Which product is undercosted and which is overcosted under the volume-based cost system compared to ABC?
Usage by
Product A
200
100,000
300
Usage by
Product B
300
Complete this question by entering your answers in the tabs below.
Predetermined Overhead Rate
Required A Required B Required C Required D Required E Required F
Calculate the predetermined overhead rate under the traditional costing system.
Note: Round your answer to 2 decimal places.
< Required A
Required G Required H Required I
Required B >

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Calculation

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

naion manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled: Number of Number of Number of Product Setups Components Direct Labor Hours 16 Standard 265 Deluxe 34 14 245 Overhead costs $50,000 $58.900 Nrter of setups and number of components are identified as activity- cost drivers for overhead. Assuming an activity - based costing system is used, what is the total amount of overhead costs assigned to the standard modela OA $54,600 OB $77 400 OC. S54,450 O0 $31.500 O Time Remaining: 02:58:03 Next
Please solve this one with calculation and explanation
A company which uses activity-based costing has two products: A and B. The annual production and sales of Product A is 12,000 units and of Product B is 10,500 units. There are three activity cost pools, with total cost and total activity as follows: Total Activity Product Product A Activity Cost Pool Total Cost Total Activity 1 Activity 2 Activity 3 52-54 $25,420 130 490 620 $38,400 $122,670 890 310 1,200 820 3,410 4,230 The activity-based costing cost per unit of Product A is closest to: (Round your intermediate calculations to 2 decimal places.) Multiple Choice $10.79 $1.60 $4.80 $3.10
Boswell Company manufactures two products, Regular and Supreme. Boswell's overhead costs consist of machining. $2400000; and assembling. $1200000. Information on the two products is: Direct labor hours Machine hours Number of parts Regular Supreme 10000 15000 30000 90000 160000 Ⓒ$2568000 $1440000. $2160000. $1032000. 10000 Overhead applied to Regular using activity-based costing is
Helm Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system: Costs: Manufacturing overhead Selling and administrative expenses Total Distribution of resource consumption: Manufacturing overhead Selling and administrative expenses $304,500 $493,000 Activity Cost Pools Customer Support 85% 20% O $116,000 O $428,000 Order Size 5% 60% S S Other 10% 20% The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. You have been asked to complete the first-stage allocation of costs to the activity cost pools. How much cost, in total, would be allocated in the first-stage allocation to the Customer Support activity cost 480,000 100,000 580,000 Total 100% 100%
Gable Company uses three activity pools. Each pool has a cost driver. Information for Gable Company follows: Total Cost of Pool $ 454,960 100,000 72,720 Estimated Cost Driver 96,800 10,000 505 Activity Pools Machining Designing costs Setup costs Suppose that Gable Company manufactures three products, A, B, and C. Information about these products follows: Product A Product B 38,000 4,000 40 Number of machine hours Number of design hours Number of batches Cost Driver Number of machine hours Number of design hours Number of batches Product A Product B Product C Total Overhead Assigned 48,000 2,200 170 Required: Using activity rates, determine the amount of overhead assigned to each product. Note: Do not round intermediate calculations. Round the final answer to nearest whole number. Product C 10,800 3,800 295
Howard Corporation manufactures two products: Product B820 and Product P99Y. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products B820 and P99Y. Activity Cost Pool Activity Measure Machining Machine setups Product design Order size Activity Measure Machine-hours Number of setups Number of products Direct labor-hours O $704,200 $301,800 Machine-hours Number of setups Number of products Direct labor-hours O $610,000 O $503,000 Total Cost $ 330,000 $ 300,000 S 46,000 2 products $ 330,000 10,000 DLHs Total Activity 15,000 MHs 500 setups Product B820 7,000 200 1 3,000 Using the plantwide overhead rate, how much manufacturing overhead cost would be allocated to Product B820? Product P99Y 8,000 300 1 7,000
Gable Company uses three activity pools. Each pool has a cost driver. Information for Gable Company follows: Total Cost of Pool $ 380, 120 86,400 74,672 Estimated Cost Driver 88,400 9,000 525 Activity Pools Machining Designing costs Setup costs E4-5 (Algo) Assigning Costs Using Activity Proportions [LO 4-5, 4-6] Suppose that Gable Company manufactures three products, A, B, and C. Information about these products follows: Product A 34,000 3,600 60 Number of machine hours Number of design hours Number of batches Cost Driver Number of machine hours Number of design hours Number of batches Product A Product B Product C Total Overhead Assigned Product B Product C 10,400 3,400 285 Required: 1. Using activity proportions, determine the amount of overhead assigned to each product. Note: Do not round your intermediate calculations. Round your final answers to nearest whole number. 44,000 2,000 180
Haresh