LO.1 & LO. 3-LO.5 (Activity analysis, ABC; pricing; cost drivers; decision making Hurley Corporation has identified the following overhead costs and cost drivers for the coming year: Budgeted Budgeted Activity Level Overhead Item Cost Driver Cost Machine setup Number of setups $ 20,000 200 Inspection Number of inspections 130,000 6,500 Material handling Number of material moves 80,000 8,000 Engineering Engineering hours 50,000 1,000 $280,000
LO.1 & LO. 3-LO.5 (Activity analysis, ABC; pricing; cost drivers; decision making Hurley Corporation has identified the following overhead costs and cost drivers for the coming year: Budgeted Budgeted Activity Level Overhead Item Cost Driver Cost Machine setup Number of setups $ 20,000 200 Inspection Number of inspections 130,000 6,500 Material handling Number of material moves 80,000 8,000 Engineering Engineering hours 50,000 1,000 $280,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Just answer the sub-part d. Thank you!
![LO.1 & LO. 3-LO.5 (Activity analysis, ABC; pricing; cost drivers; decision making)
Hurley Corporation has identified the following overhead costs and cost drivers for the
coming year:
Budgeted
Budgeted
Activity Level
Overhead Item
Cost Driver
Cost
Machine setup
Number of setups
$ 20,000
200
Inspection
Number of inspections
130,000
6,500
Material handling
Number of material moves
80,000
8,000
Engineering
Engineering hours
50,000
1,000
$280,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F12078988-28ab-4daa-9a26-56738f685735%2Fcc212995-7bb4-43d7-8db2-8f314c3714d9%2Fd6ysumi_processed.png&w=3840&q=75)
Transcribed Image Text:LO.1 & LO. 3-LO.5 (Activity analysis, ABC; pricing; cost drivers; decision making)
Hurley Corporation has identified the following overhead costs and cost drivers for the
coming year:
Budgeted
Budgeted
Activity Level
Overhead Item
Cost Driver
Cost
Machine setup
Number of setups
$ 20,000
200
Inspection
Number of inspections
130,000
6,500
Material handling
Number of material moves
80,000
8,000
Engineering
Engineering hours
50,000
1,000
$280,000
![The following information was collected on three jobs that were completed dur-
ing the year:
Job 101
Job 102
Job 103
Direct material
$5,000
$12,000
$8,000
Direct labor
$2,000
$ 2,000
$4,000
Units completed
100
50
200
Number of setups
1
2
4
Number of inspections
20
10
30
Number of material moves
30
10
50
Engineering hours
10
50
10
Budgeted direct labor cost was $100,000, and budgeted direct material cost was
$280,000.
a. If the company uses activity-based costing, how much overhead cost should be
assigned to Job 101?
b. If the company uses activity-based costing, compute the cost of each unit of Job 102.
c. The company prices its products at 140 percent of cost. If the company uses activity-
based costing, what price should it set for each unit of Job 103?
d. If the company used a traditional accounting system and allocated overhead based
on direct labor cost, by how much would each unit of Job 103 be over- or under-
costed compared to activity-based costing? What would be the management impli-
cations of this difference?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F12078988-28ab-4daa-9a26-56738f685735%2Fcc212995-7bb4-43d7-8db2-8f314c3714d9%2Fr656ya8_processed.png&w=3840&q=75)
Transcribed Image Text:The following information was collected on three jobs that were completed dur-
ing the year:
Job 101
Job 102
Job 103
Direct material
$5,000
$12,000
$8,000
Direct labor
$2,000
$ 2,000
$4,000
Units completed
100
50
200
Number of setups
1
2
4
Number of inspections
20
10
30
Number of material moves
30
10
50
Engineering hours
10
50
10
Budgeted direct labor cost was $100,000, and budgeted direct material cost was
$280,000.
a. If the company uses activity-based costing, how much overhead cost should be
assigned to Job 101?
b. If the company uses activity-based costing, compute the cost of each unit of Job 102.
c. The company prices its products at 140 percent of cost. If the company uses activity-
based costing, what price should it set for each unit of Job 103?
d. If the company used a traditional accounting system and allocated overhead based
on direct labor cost, by how much would each unit of Job 103 be over- or under-
costed compared to activity-based costing? What would be the management impli-
cations of this difference?
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