Leader Corporation manufactures two products: Product Alfa and Product Beta. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Alfa and Beta. Activity Cost Pool Activity Measure Machine-hours Total Cost Total Activity $144,000 9,000 MHs Number of setups $100,000 Number of products $52,000 Direct labor-hours $280,000 Machining Machine setups Product design General factory Activity Measure Product Alfa Product Beta Machine-hours 5,000 4,000 100 150 1 1 3,000 7,000 Number of setups Number of products Direct labor-hours 250 setups 2 products 10,000 DLHS Required: a. Using the plantwide overhead rate, how much manufacturing overhead cost would be allocated to Product Alfa? b. Using the plantwide overhead rate, how much manufacturing overhead cost would be allocated to Product Beta? c. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Alfa? d. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Beta?
Leader Corporation manufactures two products: Product Alfa and Product Beta. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Alfa and Beta. Activity Cost Pool Activity Measure Machine-hours Total Cost Total Activity $144,000 9,000 MHs Number of setups $100,000 Number of products $52,000 Direct labor-hours $280,000 Machining Machine setups Product design General factory Activity Measure Product Alfa Product Beta Machine-hours 5,000 4,000 100 150 1 1 3,000 7,000 Number of setups Number of products Direct labor-hours 250 setups 2 products 10,000 DLHS Required: a. Using the plantwide overhead rate, how much manufacturing overhead cost would be allocated to Product Alfa? b. Using the plantwide overhead rate, how much manufacturing overhead cost would be allocated to Product Beta? c. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Alfa? d. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Beta?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Leader Corporation manufactures two products: Product Alfa
and Product Beta. The company uses a plantwide overhead rate
based on direct labor-hours. It is considering implementing an
activity-based costing (ABC) system that allocates all of its
manufacturing overhead to four cost pools. The following
additional information is available for the company as a whole
and for Products Alfa and Beta.
Activity Cost Pool Activity Measure
Machine-hours
Total Cost Total Activity
$144,000 9,000 MHs
Number of setups
$100,000
Number of products
$52,000
Direct labor-hours $280,000
Machining
Machine setups
Product design
General factory
Activity Measure Product Alfa Product Beta
Machine-hours
5,000
4,000
100
150
1
1
3,000
7,000
Number of setups
Number of products
Direct labor-hours
250 setups
2 products
10,000 DLHS
Required:
a. Using the plantwide overhead rate, how much manufacturing
overhead cost would be allocated to Product Alfa?
b. Using the plantwide overhead rate, how much manufacturing
overhead cost would be allocated to Product Beta?
c. Using the ABC system, how much total manufacturing
overhead cost would be assigned to Product Alfa?
d. Using the ABC system, how much total manufacturing
overhead cost would be assigned to Product Beta?
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