### Quality Control Cost Allocation**Background Information:**Acoma Co. has established a cost pool for quality control with a total budget of $239,400. The company uses the number of inspections as the cost driver for distributing this cost. Acoma performs 34,500 inspections annually. The production numbers indicate that Product 1 requires 20,700 inspections, while Product 2 requires 13,800 inspections.**Task:**Assuming Acoma manufactures only these two products and they utilize the entirety of the company’s quality inspections, calculate the allocation of quality control costs to each product based on their respective inspection proportions.**Allocation Table:**| **Quality Control Costs** | ||---------------------------|----------|| Product 1 | || Product 2 | |To determine the cost allocation per product, use the following method:1. **Calculate the Proportion of Inspections per Product:** - Product 1 Proportion = 20,700 inspections - Product 2 Proportion = 13,800 inspections - Total Inspections = 34,5002. **Determine the Cost Allocation:** - Product 1 Cost = (20,700 / 34,500) * $239,400 - Product 2 Cost = (13,800 / 34,500) * $239,400**Purpose:**This exercise helps understand how costs are allocated based on the consumption of resources, providing insight into activity-based costing methods in a manufacturing environment.

Calculation of the quality control cost to be assigned are as follows

Required information Acoma Co. has identified one of its cost pools to be quality control and has assigned $239,400 to that pool. Number of inspections has been chosen as the cost driver for this pool; Acoma performs 34,500 inspections annually. Suppose Acoma manufactures two products that consume 20,700 (Product 1) and 13,800 (Product 2) inspections each. Assume that Acoma manufacturers only the two products mentioned and they consume 100 percent of the company's quality inspections. Using activity proportions, determine how much quality control cost will be assigned to each of Acoma's product lines. Product 1 Product 2 Quality Control Costs

Required information Acoma Co. has identified one of its cost pools to be quality control and has assigned $239,400 to that pool. Number of inspections has been chosen as the cost driver for this pool; Acoma performs 34,500 inspections annually. Suppose Acoma manufactures two products that consume 20,700 (Product 1) and 13,800 (Product 2) inspections each. Assume that Acoma manufacturers only the two products mentioned and they consume 100 percent of the company's quality inspections. Using activity proportions, determine how much quality control cost will be assigned to each of Acoma's product lines. Product 1 Product 2 Quality Control Costs

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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