Longyearbyen Co. incurs $1,050,000 of overhead costs each year in its three main departments, machining ($600,000), inspections ($300,000) and packing ($150,000). The machining department works 4,000 hours per year, there are 600 inspections per year, and the packing department packs 1,000 orders per year. In the past a traditional overhead allocation system was used using direct labor hours. They are considering switching to an activity based costs allocation of overhead. Information about Longyearbyen's two products is as follows: Machine Hours Inspections Orders Packed Direct Labor Hours Product Coal 1,000 MHs 100 Inspections 350 orders packed 1,700 DLHs Product Beer 3,000 MHs 500 Inspections 650 orders packed 1,800 DLHS Under an activity based costing allocation, Beer will be allocated $ more than under the old traditional system?

Longyearbyen Co. incurs $1,050,000 of overhead costs each year in its three main departments, machining ($600,000), inspections ($300,000) and packing ($150,000). The machining department works 4,000 hours per year, there are 600 inspections per year, and the packing department packs 1,000 orders per year. In the past a traditional overhead allocation system was used using direct labor hours. They are considering switching to an activity based costs allocation of overhead. Information about Longyearbyen's two products is as follows: Machine Hours Inspections Orders Packed Direct Labor Hours Product Coal 1,000 MHs 100 Inspections 350 orders packed 1,700 DLHs Product Beer 3,000 MHs 500 Inspections 650 orders packed 1,800 DLHS Under an activity based costing allocation, Beer will be allocated $ more than under the old traditional system?

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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