Coronado, Inc., uses a traditional product costing system to assign overhead costs uniformly to all its packaged multigrain products. To meet Food and Drug Administration requirements and to assure its customers of safe, sanitary, and nutritious food, Coronado engages in a high level of quality control. Coronado assigns its quality-control overhead costs to all products at a rate of 17% of direct labor costs. Its direct labor cost for the month of June for its low-calorie breakfast line is $74,000. In response to repeated requests from its financial vice president, Coronado's management agrees to adopt activity-based costing. Data relating to the low-calorie breakfast line for the month of June are as follows. Activity Cost Pools Cost Drivers Overhead Rate Number of Cost Drivers Used per Activity Inspections of material received Number of pounds In-process inspections Number of servings $0.90 per pound $0.33 per serving 5,500 pounds 10,700 servings FDA certification Customer orders $12.00 per order 430 orders (a) Compute the quality-control overhead cost to be assigned to the low-calorie breakfast product line for the month of June (1) using the traditional product costing system (direct labor cost is the cost driver), and (2) using activity-based costing. Traditional product costing Quality-control overhead cost to be assigned $ Activity-based costing $
Coronado, Inc., uses a traditional product costing system to assign overhead costs uniformly to all its packaged multigrain products. To meet Food and Drug Administration requirements and to assure its customers of safe, sanitary, and nutritious food, Coronado engages in a high level of quality control. Coronado assigns its quality-control overhead costs to all products at a rate of 17% of direct labor costs. Its direct labor cost for the month of June for its low-calorie breakfast line is $74,000. In response to repeated requests from its financial vice president, Coronado's management agrees to adopt activity-based costing. Data relating to the low-calorie breakfast line for the month of June are as follows. Activity Cost Pools Cost Drivers Overhead Rate Number of Cost Drivers Used per Activity Inspections of material received Number of pounds In-process inspections Number of servings $0.90 per pound $0.33 per serving 5,500 pounds 10,700 servings FDA certification Customer orders $12.00 per order 430 orders (a) Compute the quality-control overhead cost to be assigned to the low-calorie breakfast product line for the month of June (1) using the traditional product costing system (direct labor cost is the cost driver), and (2) using activity-based costing. Traditional product costing Quality-control overhead cost to be assigned $ Activity-based costing $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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Transcribed Image Text:Coronado, Inc., uses a traditional product costing system to assign overhead costs uniformly to all its packaged multigrain products. To
meet Food and Drug Administration requirements and to assure its customers of safe, sanitary, and nutritious food, Coronado engages
in a high level of quality control. Coronado assigns its quality-control overhead costs to all products at a rate of 17% of direct labor
costs. Its direct labor cost for the month of June for its low-calorie breakfast line is $74,000. In response to repeated requests from its
financial vice president, Coronado's management agrees to adopt activity-based costing. Data relating to the low-calorie breakfast
line for the month of June are as follows.
Activity Cost Pools
Cost Drivers
Overhead
Rate
Number of Cost Drivers
Used per Activity
Inspections of material received
Number of pounds
$0.90
per pound
5,500 pounds
In-process inspections
Number of servings
$0.33
per serving
10,700 servings
FDA certification
Customer orders
$12.00
per order
430 orders
(a)
Compute the quality-control overhead cost to be assigned to the low-calorie breakfast product line for the month of June (1)
using the traditional product costing system (direct labor cost is the cost driver), and (2) using activity-based costing.
Traditional product costing
Activity-based costing
Quality-control overhead cost to be assigned
$
$
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