Sunland Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining (machine hours) and machine setup (number of setups). The total estimated machine hours is 2,000, and the total estimated number of setups is 500. Presented below is information related to the company's operations. Custom Direct labor costs Machine hours Number of setups Standard Custom Activity-based costing Standard Standard Custom $50,000 1,200 Total estimated overhead costs are $291,000. Overhead cost allocated to the machining activity cost pool is $192,000, and $99,000 is allocated to the machine setup activity cost pool. Determine the difference in allocation between the two approaches. Traditional costing 120 $100,000 1,200 380 Senter a dollar amount Senter a dollar amount Senter a dollar amount. Senter a dollar amount.
Sunland Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining (machine hours) and machine setup (number of setups). The total estimated machine hours is 2,000, and the total estimated number of setups is 500. Presented below is information related to the company's operations. Custom Direct labor costs Machine hours Number of setups Standard Custom Activity-based costing Standard Standard Custom $50,000 1,200 Total estimated overhead costs are $291,000. Overhead cost allocated to the machining activity cost pool is $192,000, and $99,000 is allocated to the machine setup activity cost pool. Determine the difference in allocation between the two approaches. Traditional costing 120 $100,000 1,200 380 Senter a dollar amount Senter a dollar amount Senter a dollar amount. Senter a dollar amount.
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 13EB: Stacks manufactures two different levels of hockey sticks: the Standard and the Slap Shot. The total...
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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