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Takulah Co. Ltd has traditionally allocated its overhead based on machine hours but had collected this information to change to activity-based costing: ESTIMATED ACTIVITY ACTIVITY CENTER PRODUCT 1 PRODUCT 2 ESTIMATED COST Machine setups 15 45 $10,800 Assembly Parts 3000 3000 144600 Packaging pieces 500 400 55350 Machine hour per unit 4 3   Production volume 750 1500     Required: i) How much overhead would be allocated to each unit under the traditional allocation method?  ii) How much overhead would be allocated to each unit under activity-based costing?  iii) Would you recommend a change to ABC costing for this company? Justify your answer

Takulah Co. Ltd has traditionally allocated its overhead based on machine hours but had collected this information to change to activity-based costing: ESTIMATED ACTIVITY ACTIVITY CENTER PRODUCT 1 PRODUCT 2 ESTIMATED COST Machine setups 15 45 $10,800 Assembly Parts 3000 3000 144600 Packaging pieces 500 400 55350 Machine hour per unit 4 3   Production volume 750 1500     Required: i) How much overhead would be allocated to each unit under the traditional allocation method?  ii) How much overhead would be allocated to each unit under activity-based costing?  iii) Would you recommend a change to ABC costing for this company? Justify your answer

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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Takulah Co. Ltd has traditionally allocated its overhead based on machine hours but had collected this information to change to activity-based costing:

ESTIMATED ACTIVITY
ACTIVITY CENTER PRODUCT 1 PRODUCT 2 ESTIMATED COST
Machine setups 15 45 $10,800
Assembly Parts 3000 3000 144600
Packaging pieces 500 400 55350
Machine hour per unit 4 3  
Production volume 750 1500  

 

Required:

i) How much overhead would be allocated to each unit under the traditional allocation method? 

ii) How much overhead would be allocated to each unit under activity-based costing? 

iii) Would you recommend a change to ABC costing for this company? Justify your answer 

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