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Crane Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented here is information related to the company's operations. Direct labor costs Machine hours Setup hours :) (b) Total estimated overhead costs are $270,000. Overhead cost allocated to the machining activity cost pool is $164,000, and $106,000 is allocated to the machine setup activity cost pool. Predetermined overhead rate eTextbook and Media Compute the overhead rate using the traditional (plantwide) approach. Activity Cost Pool ✓ Your answer is correct. Machining Machine setup Activity Cost Pool Standard $50,000 Machining Machine setup Compute the overhead rates using the activity-based costing approach. Standard Custom 1,000 $ $ eTextbook and Media $ 100 $ $ $ Custom $100,000 1,000 400 Overhead Rate 180 % of direct labor cost 82 per machine hour 212 per setup hour Determine the difference in allocation between the two approaches. (Enter negative answers using either a negative sign preceding the number eg.-2,945 or parentheses eg. (2,945).) Traditional costing (A) Overhead Rate 82 per machine hour 212 per setup hour Activity-based costing (B) $ $ $ $ Difference (A)-(B)

Crane Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented here is information related to the company's operations. Direct labor costs Machine hours Setup hours :) (b) Total estimated overhead costs are $270,000. Overhead cost allocated to the machining activity cost pool is $164,000, and $106,000 is allocated to the machine setup activity cost pool. Predetermined overhead rate eTextbook and Media Compute the overhead rate using the traditional (plantwide) approach. Activity Cost Pool ✓ Your answer is correct. Machining Machine setup Activity Cost Pool Standard $50,000 Machining Machine setup Compute the overhead rates using the activity-based costing approach. Standard Custom 1,000 $ $ eTextbook and Media $ 100 $ $ $ Custom $100,000 1,000 400 Overhead Rate 180 % of direct labor cost 82 per machine hour 212 per setup hour Determine the difference in allocation between the two approaches. (Enter negative answers using either a negative sign preceding the number eg.-2,945 or parentheses eg. (2,945).) Traditional costing (A) Overhead Rate 82 per machine hour 212 per setup hour Activity-based costing (B) $ $ $ $ Difference (A)-(B)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Crane Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented here is information related to the company's operations. Direct labor costs Machine hours Setup hours (c) (b) Total estimated overhead costs are $270,000. Overhead cost allocated to the machining activity cost pool is $164,000, and $106,000 is allocated to the machine setup activity cost pool. Predetermined overhead rate. eTextbook and Media Compute the overhead rate using the traditional (plantwide) approach. Activity Cost Pool Your answer is correct. Machining Machine setup Standard $50,000 Activity Cost Pool Machining Machine setup Compute the overhead rates using the activity-based costing approach. Standard 1,000 $ 100 $ eTextbook and Media Custom $ $ $ Custom $100,000 1,000 400 Traditional costing (A) Overhead Rate 180 % of direct labor cost 82 per machine hour Overhead Rate 212 per setup hour Determine the difference in allocation between the two approaches. (Enter negative answers using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).) 82 per machine hour 212 per setup hour Activity-based costing (B) $ $ $ Difference (A)-(B)
Transcribed Image Text:Crane Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented here is information related to the company's operations. Direct labor costs Machine hours Setup hours (c) (b) Total estimated overhead costs are $270,000. Overhead cost allocated to the machining activity cost pool is $164,000, and $106,000 is allocated to the machine setup activity cost pool. Predetermined overhead rate. eTextbook and Media Compute the overhead rate using the traditional (plantwide) approach. Activity Cost Pool Your answer is correct. Machining Machine setup Standard $50,000 Activity Cost Pool Machining Machine setup Compute the overhead rates using the activity-based costing approach. Standard 1,000 $ 100 $ eTextbook and Media Custom $ $ $ Custom $100,000 1,000 400 Traditional costing (A) Overhead Rate 180 % of direct labor cost 82 per machine hour Overhead Rate 212 per setup hour Determine the difference in allocation between the two approaches. (Enter negative answers using either a negative sign preceding the number e.g. -2,945 or parentheses e.g. (2,945).) 82 per machine hour 212 per setup hour Activity-based costing (B) $ $ $ Difference (A)-(B)
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