Oriole Toys & Games, Inc. manufactures specialty toys. Oriole uses a traditional product costing system to assign overhead costs uniformly to all products. To meet industry safety standards and to assure its customers of safe and durable toys, Oriole assigns its quality-control overhead costs to all products at a rate of 19% of direct labor costs. Its direct labor cost for the month of August for its toddler line of toys is $321,000. In response to repeated requests from its financial vice president, Oriole's management agrees to adopt activity-based costing. Data relating to the toddler line of toys for the month of August are as follows: Activity Cost Pools Materials Inspection Assembly Line Inspection National Toy Association Certification (a) Your answer is incorrect. Traditional costing Cost Drivers Number of pounds Number of finished toys Retail orders Quality-Control Overhead Cost +A Compute the quality-control overhead cost to be assigned to the toddler toy line for the month of August (1) using the traditional product costing system (direct labor is the cost driver), and (2) using activity-based costing. Activity-based costing $ Overhead Rate $0.70 per pound $0.15 per toy $2.00 per order Number of Cost Drivers Used per Activity 46,000 pounds 171,000 toys 800 orders
Oriole Toys & Games, Inc. manufactures specialty toys. Oriole uses a traditional product costing system to assign overhead costs uniformly to all products. To meet industry safety standards and to assure its customers of safe and durable toys, Oriole assigns its quality-control overhead costs to all products at a rate of 19% of direct labor costs. Its direct labor cost for the month of August for its toddler line of toys is $321,000. In response to repeated requests from its financial vice president, Oriole's management agrees to adopt activity-based costing. Data relating to the toddler line of toys for the month of August are as follows: Activity Cost Pools Materials Inspection Assembly Line Inspection National Toy Association Certification (a) Your answer is incorrect. Traditional costing Cost Drivers Number of pounds Number of finished toys Retail orders Quality-Control Overhead Cost +A Compute the quality-control overhead cost to be assigned to the toddler toy line for the month of August (1) using the traditional product costing system (direct labor is the cost driver), and (2) using activity-based costing. Activity-based costing $ Overhead Rate $0.70 per pound $0.15 per toy $2.00 per order Number of Cost Drivers Used per Activity 46,000 pounds 171,000 toys 800 orders
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Oriole Toys & Games, Inc. manufactures specialty toys. Oriole uses a traditional product costing system to assign overhead costs
uniformly to all products. To meet industry safety standards and to assure its customers of safe and durable toys, Oriole assigns its
quality-control overhead costs to all products at a rate of 19% of direct labor costs. Its direct labor cost for the month of August for its
toddler line of toys is $321,000. In response to repeated requests from its financial vice president, Oriole's management agrees to
adopt activity-based costing. Data relating to the toddler line of toys for the month of August are as follows:
Activity Cost Pools
Materials Inspection
Assembly Line Inspection
National Toy Association Certification
(a)
Your answer is incorrect.
Traditional costing
Cost Drivers
Number of pounds
1A
Number of finished toys
Retail orders
Compute the quality-control overhead cost to be assigned to the toddler toy line for the month of August (1) using the traditional
product costing system (direct labor is the cost driver), and (2) using activity-based costing.
Quality-Control Overhead Cost
Activity-based costing $
Overhead
Rate
$0.70 per pound
$0.15 per toy
$2.00 per order
Number of Cost
Drivers Used
per Activity
46,000 pounds
171,000 toys
800 orders
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