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

See similar textbooks

Related questions

Q: The Fleming Company of Anguilla (FCA) designs and produces automotive parts. In 2019, actual…

A: Cost Accounting: Cost accounting is characterized as "an efficient arrangement of strategies for…

Q: How are the avoidable fixed MOH and the unavoidable fixed MOH calculated? I see that they equal the…

A: Fixed manufacturing overheads (MOH) is the amount of all indirect expenses or costs which are…

Q: Companies can choose from different costing methods: process/product costing and activity-based…

A: Process costing: Process costing is used when there is a continuous manufacturing process. The…

Q: Why would someone choose the multiple production department FOH rate method when it is more…

A: This means that although calculating and managing the multiple production department rate method may…

Q: Identify the following as fixed costs (F), variable costs (V), or mixed costs(M). office salaries…

A: Fixed cost will remain fixed for unit Variable cost will change with change in level of activity…

Q: In recent years, why has labor become such a small part of product costs and how can its use in…

A: Overhead allocation is the process of distributing indirect costs or overhead expenses to specific…

Q: What is a normal costing system, and why do companies tend to use a normal costing system to apply…

A: Cost is the total amount that has been spent on production of goods or rendering of services. Cost…

Q: For utilities for factory premises- why would this not be a product cost

A: Direct materials : These are the raw materials that are directly identifiable and used in the…

Q: umerous predetermined overhead rates while traditional uses only one. The way they assign direct…

A: Correct answer is Activity based costing may not assign all product costs to units if they are…

Q: APPLY THE CONCEPTS: Determine the total fixed cost Costs that are not tied to changes in production…

A: Fixed costs are those costs which do not change with change in level of activity. For example,…

Q: A stapler manufacturer uses a single plantwide predetermined overhead allocation rate to allocate…

A: Step 1: Overhead cost is the cost spent by the business over and above the labor cost. It can be…

Q: Which of the following statements is true? Multiple Cholce Varlable costing treats direct materials…

A: The period costs are the costs which are expensed in the period they are incurred. Example selling…

Q: Which type of manufacturing cost (direct materials, direct labor, variable factory overhead, fixed…

A: Cost of goods manufactured as per Absorption costing = Direct material + Direct labor + Variable…

Q: As mentioned, direct costs are not always product or manufacturing costs. Consider a company that…

A: These costs are not related to the production process at all. Instead, they are incurred over a…

Q: Why do businesses apply overhead to tasks using fixed rates rather than real manufacturing overhead…

A: This question deals with real manufacturing overhead costs:

Q: Which would NOT be relevant in a make- or- buy decision? a) factory deprciation b) direct materials…

A: The cost can be classified into two categories i.e fixed cost and variable cost. The FIxed cost…

Q: Costs that are not tied to changes in production level across the relevant range are known as "fixed…

A: Total FC always remain constant and does not vary with the production level.

Q: Magle Company manufactures two video game consoies handheld and home. The handheld consoles are…

A: Overheads are those indirect costs which can not be allocated directly. Activity based costing…

Q: “There’s no reason for me to get excited about the choice between the weighted-average and FIFO…

A: Weighted Average Method: Weighted average method is the method in which per unit cost is calculated…

Q: Which of the following is an important feature when considering the use of a single plantwide…

A: Overheads are considered as fixed and common expenses that should be allocated to the products on…

Q: Which of the following would be more likely to use process costing rather than job-order costing?…

A: Job costing is a part of cost accounting that tracks the cost and revenues of specific jobs. It is a…

Q: Direct material used Direct labor Variable manufacturing overhead Fixed manufacturing overhead…

A: Formula: Per Unit cost = Direct materials + Direct labor + Variable manufacturing overhead + Fixed…

Q: Which ONE of the following statements concerning costing is correct? a) The procedures used to…

A: The system of process costing is suitable for industries involving continuous production of the same…

Q: How would the classification of costs as direct or indirect change when the cost object shifts from…

A: Direct cost refers to the cost which is incurred through firm when performing the core activity of…

Q: One of the disadvantages of the departmental and the plantwide overhead rate methods is that OA…

A: An overhead rate method is a cost accounting technique used by businesses to allocate and apply…

Q: Why would a business that uses traditional costing systems consider implementing activity-based…

A: Cost-volume profit analysis is a tool that helps in decision making by establishing a relationship…

Q: how to solve plantwide overhead rate versus departmental rates, effects on pricing decisions?

A: Since there are multiple sub parts in the question, calculation will be given for first three sub…

Q: Which THREE of the following statements about activity-based costing (ABC) and traditional costing…

A: The differences between ABC (Activity-Based Costing) and traditional costing can be summarized in…

Q: Which of the following statements about overhead allocation based on volume alone is correct?…

A: When overhead costs are allocated based solely on volume (such as units produced), it doesn't…

Q: Accounting Direct labor or machine hours may not be the appropriate cost driver for overhead in all…

A: Activity based costing is the method used by the entities because it helps in reducing the…

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

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!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step 5

Trending now

This is a popular solution!

Step by step

Solved in 5 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

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.

Similar questions

Why might a company decide to use departmental overhead rates instead of a plantwide overhead rate?
Hoskins Co. uses a plant-wide factory overhead rate based on direct labor hours. Overhead costs would be overcharged to which of the following departments? A. A labor-intensive department B. A capital-intensive department C. A materials-intensive department D. None of the above
Assigning manufacturing overhead to a specific job is complicated by all of the following except: Multiple Choice Manufacturing overhead is an indirect cost that is either impossible or difficult to trace to a particular job. Manufacturing overhead is incurred only to support some jobs. Manufacturing overhead consists of both variable and fixed costs. The average cost of actual fixed manufacturing overhead expenses will vary depending on how many units are produced in a perio
What do you think are some advantages for using the ABC method versus a single plant-wide rate or multiple departmental overhead rates. Why would an activity-based costing (ABC) system appeal to some companies and not all companies. Provide at least 3 examples of companies you think would and wouldn't want to use the ABC method.
If the single plantwide overhead rate is the easiest method to allocate support department costs to production departments, why would a company use a more complicated method?
All of the following are variable costs except for which of the following? Group of answer choices Production supervisor’s salary Sales commission based on number of sales units Direct material costs Direct labor costs
Which of the three methods (Single Plant wide factory overhead rate, Multiple production department rate, and Activity based costing method) for allocating factory overhead cost to products is better?
When a company implements activity-based costing, manufacturing overhead cost is often shifted from low volume products to high volume products, with a higher unit cost resulting for the high volume products. Please explain (True or False) thoroughly.
Which of the following conditions would favour the use of activity-based costing (ABC) rather than traditional absorption costing? (1) Overheads represent a large proportion of total cost (2) A diverse product range with complex manufacturing operations (3) Overheads are primarily driven by volume of output O 1, 2 and 3 O 2 only O 1 and 3 only O 1 and 2 only
why companies switched from traditional costing to activity based costing?
How would you explain to a company’s management the primary difference between traditional and activity-based costing?
Using ABC product cost information when considering reducing cost, which of the following would not be a way to reduce activity costs? a.Improve operations so that the activity-base usage per unit is eliminated. b.Switch to a plantwide allocation rate. c.Improve operations so that the activity-base usage per unit is reduced. d.Change the classification of employees doing an activity to decrease the activity rate.