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 2,000 $100,000 1,000 200,000 50 50,000 $350,000 A B с Total The following data relate to cost driver event activity within the two divisions during the most recent year. Eastern Division Western Division Total 500 2,000 1,500 200 800 1,000 30 50 20 3,000 5,000 2,000 Cost Driver A events Cost Driver B events Cost Driver C events Direct labor hours 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: a. profit for Western Division would have increased by $5,000. b. profit for Western Division would have decreased by $205,000. c. profit for Eastern Division would have decreased by $145,000. * d. profit for Eastern Division would have increased by $5,000. O
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 2,000 $100,000 1,000 200,000 50 50,000 $350,000 A B с Total The following data relate to cost driver event activity within the two divisions during the most recent year. Eastern Division Western Division Total 500 2,000 1,500 200 800 1,000 30 50 20 3,000 5,000 2,000 Cost Driver A events Cost Driver B events Cost Driver C events Direct labor hours 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: a. profit for Western Division would have increased by $5,000. b. profit for Western Division would have decreased by $205,000. c. profit for Eastern Division would have decreased by $145,000. * d. profit for Eastern Division would have increased by $5,000. O
Chapter1: Financial Statements And Business Decisions
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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.
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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
2,000 $100,000
1,000 200,000
50,000
$350,000
с
50
Total
The following data relate to cost driver event activity within the two divisions during the most recent year.
Eastern Division Western Division Total
500 2,000
800 1,000
20 50
3,000 5,000
Cost Driver A events
Cost Driver B events
Cost Driver C events
Direct labor hours
1,500
200
30
2,000
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:
a. profit for Western Division would have increased by $5,000.
b. profit for Western Division would have decreased by $205,000.
c. profit for Eastern Division would have decreased by $145,000. *
d. profit for Eastern Division would have increased by $5,000.
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