Gwynnie Pie Company makes dessert pies for national fast food chains. Gwynnie Pie Company is considering using ABC costing and has the following activity cost pools and information available: Estimated Overhead Costs Estimated Activity Activities 2,500 batches Material handling measured by batches $250,000 $114,000 $78,000 $15,000 2,400 batches Mixing measured by batches 1,950,000 units 260 setups Packaging measured by units Maintenance measured by # of setups Gwynnie Pie Company currently uses a plantwide overhead rate based on total estimated machine hours of 100,000 hours. The following information was gathered regarding Job 607: #of units in the job 4,700 #of units in each batch 940 #of setups required to complete the job 1 #of machine hours 220 How much would the overhead be overcosted or undercosted if Gwynnie Pie Company continues to use the plantwide overhead rate as opposed to using ABC Costing? O A. $983.19 undercosted O B. $1,005.40 overcosted O C. $57.69 undercosted O D. $22.21 overcosted

Gwynnie Pie Company makes dessert pies for national fast food chains. Gwynnie Pie Company is considering using ABC costing and has the following activity cost pools and information available: Estimated Overhead Costs Estimated Activity Activities 2,500 batches Material handling measured by batches $250,000 $114,000 $78,000 $15,000 2,400 batches Mixing measured by batches 1,950,000 units 260 setups Packaging measured by units Maintenance measured by # of setups Gwynnie Pie Company currently uses a plantwide overhead rate based on total estimated machine hours of 100,000 hours. The following information was gathered regarding Job 607: #of units in the job 4,700 #of units in each batch 940 #of setups required to complete the job 1 #of machine hours 220 How much would the overhead be overcosted or undercosted if Gwynnie Pie Company continues to use the plantwide overhead rate as opposed to using ABC Costing? O A. $983.19 undercosted O B. $1,005.40 overcosted O C. $57.69 undercosted O D. $22.21 overcosted

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

How much would the overhead be overcosted or undercosted if Gwynnie Pie Company continues to use the plantwide overhead rate as opposed to using ABC Costing?

Gwynnie Pie Company makes dessert pies for national fast food chains. Gwynnie Pie Company is considering using ABC costing and has the following activity cost pools and information available:
Estimated Overhead Costs
Estimated Activity
Activities
2,500 batches
Material handling measured by batches
$250,000
$114,000
$78,000
$15,000
2,400 batches
Mixing measured by batches
1,950,000 units
260 setups
Packaging measured by units
Maintenance measured by # of setups
Gwynnie Pie Company currently uses a plantwide overhead rate based on total estimated machine hours of 100,000 hours. The following information was gathered regarding Job 607:
#of units in the job 4,700
#of units in each batch 940
#of setups required to complete the job 1
#of machine hours 220
How much would the overhead be overcosted or undercosted if Gwynnie Pie Company continues to use the plantwide overhead rate as opposed to using ABC Costing?
O A. $983.19 undercosted
O B. $1,005.40 overcosted
O C. $57.69 undercosted
O D. $22.21 overcosted

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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