Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes. Activity (Cost) Machine maintenance ($420,000) Setups ($790,000) Packing ($198,000) Photo development ($440,000) Deluxe 60,000 Moderate 180,000 Cost Driver Number of machine hours. Number of setups Number of cartons Number of pictures Economy 240,000 Type of Textbook Moderate 900 10 40 1,500 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 300 35 10 3,500 For all requirements. round your answers to 2 decimal places.) Economy 1,200 5 60 500 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.
Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes. Activity (Cost) Machine maintenance ($420,000) Setups ($790,000) Packing ($198,000) Photo development ($440,000) Deluxe 60,000 Moderate 180,000 Cost Driver Number of machine hours. Number of setups Number of cartons Number of pictures Economy 240,000 Type of Textbook Moderate 900 10 40 1,500 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 300 35 10 3,500 For all requirements. round your answers to 2 decimal places.) Economy 1,200 5 60 500 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
Activity (Cost)
Machine maintenance ($420,000)
Setups ($790,000)
Packing ($198,000)
Photo development ($440,000)
Deluxe
60,000
Moderate
180,000
Cost Driver
Number of machine hours
Number of setups
Economy
240,000
Number of cartons
Number of pictures
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:
Type of Textbook
Moderate
900
10
40
1,500
Deluxe
300
35
10
3,500
(For all requirements. round your answers to 2 decimal places.)
Economy
1,200
5
60
500
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.
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