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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.

FINANCIAL ACCOUNTING
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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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.
Transcribed Image Text: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.
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