Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes. Type of Textbook Activity (Cost) Machine maintenance ($330,000) Setups ($630, 000) Packing ($166,000) Photo development ($574,000) Cost Driver Deluxe Moderate Economy 1,000 Number of machine hours 250 750 Number of setups 35 20 15 Number of cartons 10 30 60 Number of pictures 4,400 2,400 1,400 Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include pictures only in chapter openings. Required a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books during the prior year: Deluxe Moderate Economy 200,000 50,000 150,000 Determine the overhead cost per book for each book type. b. Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced with an activity-based costing system. (For all requirements, round your answers to 2 decimal places.) Deluxe Moderate Economy a. Cost per book (volume-based allocation) b Cost per book (activity-based costing)
Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes. Type of Textbook Activity (Cost) Machine maintenance ($330,000) Setups ($630, 000) Packing ($166,000) Photo development ($574,000) Cost Driver Deluxe Moderate Economy 1,000 Number of machine hours 250 750 Number of setups 35 20 15 Number of cartons 10 30 60 Number of pictures 4,400 2,400 1,400 Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include pictures only in chapter openings. Required a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books during the prior year: Deluxe Moderate Economy 200,000 50,000 150,000 Determine the overhead cost per book for each book type. b. Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced with an activity-based costing system. (For all requirements, round your answers to 2 decimal places.) Deluxe Moderate Economy a. Cost per book (volume-based allocation) b Cost per book (activity-based costing)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three
types of textbooks the company publishes.
Type of Textbook
Activity (Cost)
Machine maintenance ($330,000)
Setups ($630,000)
Packing ($166,000)
Photo development ($574,000)
Cost Driver
Deluxe
Moderate
Economy
Number of machine hours
250
750
1,000
Number of setups
35
20
15
Number of cartons
10
30
60
Number of pictures
4,400
2,400
1,400
Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with
three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include
pictures only in chapter openings.
Required
a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books
during the prior year:
Deluxe
Moderate
Economy
50,000
150,000
200,000
Determine the overhead cost per book for each book type.
b. Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced
with an activity-based costing system.
(For all requirements, round your answers to 2 decimal places.)
Deluxe
Moderate
Economy
Cost per book (volume-based allocation)
а.
b.
Cost per book (activity-based costing)
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