Curry Company has two divisions, Eastern Division and Western Division. Curry Company has been allocating overhead based on direct labor hours. For the most recent year, the predetermined overhead rate was $70 per direct labor hour. An activity-based costing analysis of Curry's operations has identified three different cost pools. Data about the cost drivers for each pool for the most recent year given below. Cost Pool Number of Events per Year Cost Pool A B C Total 2,000 $100,000 1,000 200,000 50 50,000 $350,000 The following data relate to cost driver event activity within the two divisions during the most recent year. Cost Driver A events Eastern Division Western Division Total 1,500 500 2,000 Cost Driver B events 200 800 1,000 Cost Driver C events Direct labor hours 30 20 2,000 50 3,000 5,000 Which of the following statements is correct? If the activity-based costing system had been used in the most recent year in place of the traditional overhead allocation technique, Select one: ୦ a. profit for Eastern Division would have increased by $5,000. b. profit for Western Division would have increased by $5,000. c. profit for Eastern Division would have decreased by $145,000. d. profit for Western Division would have decreased by $205,000.
Curry Company has two divisions, Eastern Division and Western Division. Curry Company has been allocating overhead based on direct labor hours. For the most recent year, the predetermined overhead rate was $70 per direct labor hour. An activity-based costing analysis of Curry's operations has identified three different cost pools. Data about the cost drivers for each pool for the most recent year given below. Cost Pool Number of Events per Year Cost Pool A B C Total 2,000 $100,000 1,000 200,000 50 50,000 $350,000 The following data relate to cost driver event activity within the two divisions during the most recent year. Cost Driver A events Eastern Division Western Division Total 1,500 500 2,000 Cost Driver B events 200 800 1,000 Cost Driver C events Direct labor hours 30 20 2,000 50 3,000 5,000 Which of the following statements is correct? If the activity-based costing system had been used in the most recent year in place of the traditional overhead allocation technique, Select one: ୦ a. profit for Eastern Division would have increased by $5,000. b. profit for Western Division would have increased by $5,000. c. profit for Eastern Division would have decreased by $145,000. d. profit for Western Division would have decreased by $205,000.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 3CMA: Young Company is beginning operations and is considering three alternatives to allocate...
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Transcribed Image Text:Curry Company has two divisions, Eastern Division and Western Division. Curry Company has been allocating overhead based on direct labor hours. For the most recent year, the predetermined overhead rate was $70 per direct
labor hour.
An activity-based costing analysis of Curry's operations has identified three different cost pools. Data about the cost drivers for each pool for the most recent year given below.
Cost Pool Number of Events per Year Cost Pool
A
B
C
Total
2,000
$100,000
1,000 200,000
50
50,000
$350,000
The following data relate to cost driver event activity within the two divisions during the most recent year.
Cost Driver A events
Eastern Division Western Division Total
1,500
500 2,000
Cost Driver B events
200
800 1,000
Cost Driver C events
Direct labor hours
30
20
2,000
50
3,000 5,000
Which of the following statements is correct?
If the activity-based costing system had been used in the most recent year in place of the traditional overhead allocation technique,
Select one:
୦
a. profit for Eastern Division would have increased by $5,000.
b. profit for Western Division would have increased by $5,000.
c. profit for Eastern Division would have decreased by $145,000.
d. profit for Western Division would have decreased by $205,000.
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