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Compute the quality-control overhead cost to be assigned to the toddler toy line for the month of August product costing system (direct labor is the cost driver), and (2) using activity-based costing. Traditional costing Quality-Control Overhead Cost

Compute the quality-control overhead cost to be assigned to the toddler toy line for the month of August product costing system (direct labor is the cost driver), and (2) using activity-based costing. Traditional costing Quality-Control Overhead Cost

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter9: Evaluating Variances From Standard Costs
Section: Chapter Questions
Problem 4CMA: JoyT Company manufactures Maxi Dolls for sale in toy stores. In planning for this year, JoyT...
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(a) Compute the quality-control overhead cost to be assigned to the toddler toy line for the month of August (1) using the traditional product costing system (direct labor is the cost driver), and (2) using activity-based costing. Traditional costing Activity-based costing Quality-Control Overhead Cost +A $ $ LA
Transcribed Image Text:(a) Compute the quality-control overhead cost to be assigned to the toddler toy line for the month of August (1) using the traditional product costing system (direct labor is the cost driver), and (2) using activity-based costing. Traditional costing Activity-based costing Quality-Control Overhead Cost +A $ $ LA
Waterway Toys & Games, Inc. manufactures specialty toys. Waterway uses a traditional product costing system to assign overhead costs uniformly to all products. To meet industry safety standards and to assure its customers of safe and durable toys, Waterway assigns its quality-control overhead costs to all products at a rate of 21% of direct labor costs. Its direct labor cost for the month of August for its toddler line of toys is $321,000. In response to repeated requests from its financial vice president, Waterway's management agrees to adopt activity-based costing. Data relating to the toddler line of toys for the month of August are as follows: Activity Cost Pools Materials Inspection Assembly Line Inspection National Toy Association Certification (a) Traditional costing Activity-based costing Compute the quality-control overhead cost to be assigned to the toddler toy line for the month of August (1) using the traditional product costing system (direct labor is the cost driver), and (2) using activity-based costing. Quality-Control Overhead Cost $ Cost Drivers Number of pounds Number of finished toys Retail orders $ LA Overhead Rate $0.70 per pound $0.14 per toy $2.00 per order Number of Cost Drivers Used per Activity 45,000 pounds 217,000 toys 700 orders
Transcribed Image Text:Waterway Toys & Games, Inc. manufactures specialty toys. Waterway uses a traditional product costing system to assign overhead costs uniformly to all products. To meet industry safety standards and to assure its customers of safe and durable toys, Waterway assigns its quality-control overhead costs to all products at a rate of 21% of direct labor costs. Its direct labor cost for the month of August for its toddler line of toys is $321,000. In response to repeated requests from its financial vice president, Waterway's management agrees to adopt activity-based costing. Data relating to the toddler line of toys for the month of August are as follows: Activity Cost Pools Materials Inspection Assembly Line Inspection National Toy Association Certification (a) Traditional costing Activity-based costing Compute the quality-control overhead cost to be assigned to the toddler toy line for the month of August (1) using the traditional product costing system (direct labor is the cost driver), and (2) using activity-based costing. Quality-Control Overhead Cost $ Cost Drivers Number of pounds Number of finished toys Retail orders $ LA Overhead Rate $0.70 per pound $0.14 per toy $2.00 per order Number of Cost Drivers Used per Activity 45,000 pounds 217,000 toys 700 orders
Expert Solution
Step 1

Activity Based Costing Means Allocation Of Overhead Cost To Different Activity Cost Pools. And After getting Activity Rate For All Activity Cost Pool. Activity Rate Is Multiply By The Number Of Cost Driver Used Per Activity.

Activity Rate = (Overhead Cost Pool / Cost Driver)

Cost Assigned = (Number Of Cost Driver Used Per Activity  * Activity Rate)

 

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