g Sheridan, Inc. produces two types of gas grills: a family model and a deluxe model. Sheridan's controller has decided to use a plantwic overhead rate based on direct labor costs. The president of the company recently 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 below is information related to the company's operations: Direct labor costs Machine hours Setup hours Family Model Deluxe Model $72,300 $144,600 2,000 200 Total estimated overhead costs are $433,800. Overhead cost allocated to the machining activity cost pool is $260,280 and $173,520 is allocated to the machine setup activity cost pool. Show Transcribed Text Direct labor costs Machine hours Setup hours Packaging hours Sheridan, Inc. decided to implement the activity-based costing approach and was quite successful in its use. However, the controller is wondering if instead of only two activity cost pools, they should expand to three activity cost pools based on the following: 2,000 800 2,000 G Family Model Deluxe Model $72,300 $144,600 200 50 2,000 800 75 The estimated overhead of $433,800 is allocated as follows: machining activity cost pool $231.360, machine set up $163,880 and packaging $38,560. (1) Determine the overhead rates using the activity-based costing approach with three cost pools. (Round answers to 2 decimal places, eg. 15.25)
g Sheridan, Inc. produces two types of gas grills: a family model and a deluxe model. Sheridan's controller has decided to use a plantwic overhead rate based on direct labor costs. The president of the company recently 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 below is information related to the company's operations: Direct labor costs Machine hours Setup hours Family Model Deluxe Model $72,300 $144,600 2,000 200 Total estimated overhead costs are $433,800. Overhead cost allocated to the machining activity cost pool is $260,280 and $173,520 is allocated to the machine setup activity cost pool. Show Transcribed Text Direct labor costs Machine hours Setup hours Packaging hours Sheridan, Inc. decided to implement the activity-based costing approach and was quite successful in its use. However, the controller is wondering if instead of only two activity cost pools, they should expand to three activity cost pools based on the following: 2,000 800 2,000 G Family Model Deluxe Model $72,300 $144,600 200 50 2,000 800 75 The estimated overhead of $433,800 is allocated as follows: machining activity cost pool $231.360, machine set up $163,880 and packaging $38,560. (1) Determine the overhead rates using the activity-based costing approach with three cost pools. (Round answers to 2 decimal places, eg. 15.25)
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
Please Do not Give image format
Transcribed Image Text:g
Sheridan, Inc. produces two types of gas grills: a family model and a deluxe model. Sheridan's controller has decided to use a plantwic
overhead rate based on direct labor costs. The president of the company recently 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 below is information related to the company's operations:
Direct labor costs
Machine hours
Setup hours
Family Model
$72,300
2,000
200
Direct labor costs
Machine hours
Setup hours
Packaging hours
Total estimated overhead costs are $433,800. Overhead cost allocated to the machining activity cost pool is $260,280 and $173,520
is allocated to the machine setup activity cost pool.
Deluxe Model
Show Transcribed Text
Family Model
$72,300
$144,600
2,000
Sheridan, Inc. decided to implement the activity-based costing approach and was quite successful in its use. However, the
controller is wondering if instead of only two activity cost pools, they should expand to three activity cost pools based on the
following:
200
50
2,000
800
G
Deluxe Model
$144,600
2,000
800
75
The estimated overhead of $433,800 is allocated as follows: machining activity cost pool $231,360, machine set up $163,880 and
packaging $38,560.
(1)
Determine the overhead rates using the activity-based costing approach with three cost pools. (Round answers to 2 decimal places,
eg. 15.25)
Transcribed Image Text:O
Machining
Machine set up
Packaging
$
$
Family model $
$
Deluxe model $
Difference
(2)
Calculate the overhead allocation for the family model and the deluxe model using three activity cost pools.
$
Overhead Rate
The additional cost pool
Overhead Allocation
per hour
What is the difference in allocation between two activity cost pools and three activity cost pools? Is the difference in allocation
worth using the third activity cost pool?
per hour
Show Transcribed Text
per hour
G
What is the difference in allocation between two activity cost pools and three activity cost pools? Is the difference in allocation
worth using the third activity cost pool?
Ĉ
the overhead cost allocation significantly.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Step 1: Formula :
VIEWStep 2: (1)Determine the Overhead Rates using the Activity-Based Costing Approach with three Cost Pools :
VIEWStep 3: (2) Overhead Allocation under Three Activity Cost Pools
VIEWStep 4: Overhead Allocation under Two Activity Cost Pools :
VIEWStep 5: Difference in Allocation :
VIEWStep 6: Difference in Allocation worth using the Three Activity Cost Pool?
VIEWSolution
VIEW
Trending now
This is a popular solution!
Step by step
Solved in 7 steps
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