Coronado Toys & Games, Inc. manufactures specialty toys. Coronado 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, Coronado assigns its quality-control overhead costs to all products at a rate of 20% of direct labor costs. Its direct labor cost for the month of August for its toddler line of toys is $343,000. In response to repeated requests from its financial vice president, Coronado'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 Traditional costing Activity-based costing Cost Drivers Number of pounds Number of finished toys Retail orders Quality-Control Overhead Cost $ 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. $ Overhead Rate $0.70 per pound $0.15 per toy $2.00 per order Number of Cost Drivers Used per Activity 60,000 pounds 153,000 toys 900 orders
Coronado Toys & Games, Inc. manufactures specialty toys. Coronado 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, Coronado assigns its quality-control overhead costs to all products at a rate of 20% of direct labor costs. Its direct labor cost for the month of August for its toddler line of toys is $343,000. In response to repeated requests from its financial vice president, Coronado'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 Traditional costing Activity-based costing Cost Drivers Number of pounds Number of finished toys Retail orders Quality-Control Overhead Cost $ 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. $ Overhead Rate $0.70 per pound $0.15 per toy $2.00 per order Number of Cost Drivers Used per Activity 60,000 pounds 153,000 toys 900 orders
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
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.
Topic Video
Question
Thapa
Transcribed Image Text:Coronado Toys & Games, Inc. manufactures specialty toys. Coronado 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, Coronado
assigns its quality-control overhead costs to all products at a rate of 20% of direct labor costs. Its direct labor cost for the month of
August for its toddler line of toys is $343,000. In response to repeated requests from its financial vice president, Coronado'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
Traditional costing
Activity-based costing
$
Cost Drivers
$
Number of pounds
Number of finished toys
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
LA
Retail orders
Overhead
Rate
$0.70 per pound
$0.15 per toy
$2.00 per order
Number of Cost
Drivers Used
per Activity
60,000 pounds
153,000 toys
900 orders
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 1 images
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.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education