### Overhead Assignment Analysis for Swifty Corporation's Product LinesSwifty Corporation manufactures safes—specifically, large mobile safes and large walk-in stationary bank safes. As part of its annual budgeting process, Swifty is analyzing the profitability of its two products. An essential part of this analysis involves estimating the overhead assigned to each product line. The data provided below pertains to overhead allocation.#### Product Line Information| | Mobile Safes | Walk-in Safes ||---------------------|--------------|---------------|| **Units planned for production** | 200 | 50 || **Material moves per product line** | 300 | 200 || **Purchase orders per product line** | 450 | 350 || **Direct labor hours per product line** | 800 | 1,700 |#### Part (a)The total estimated manufacturing overhead was $260,000. Using traditional costing (which assigns overhead based on direct labor hours), the following amounts of overhead costs are assigned:1. **One mobile safe**: $416 per unit2. **One walk-in safe**: $3,536 per unit#### Part (b1)The total estimated manufacturing overhead of $260,000 comprises $160,000 for materials handling costs and $100,000 for purchasing activity costs. Using activity-based costing (ABC), the overhead costs assigned are:1. **Materials Handling Costs**: - **One mobile safe**: $480 each - **One walk-in safe**: $1,280 each### Explanation of Calculations- **Traditional Costing**: Allocates overhead costs using direct labor hours. This method calculates the overhead per unit by dividing the total overhead assigned to the product line by the number of units produced.- **Activity-Based Costing (ABC)**: Allocates overhead costs based on specific activities that generate costs. In this case, materials handling costs and purchasing activity costs are considered.### Understanding Graphs and DiagramsWhile not present in the text, visual representations typically include bar charts or pie charts to portray overhead costs per unit and comparisons between traditional costing versus ABC. For better comprehension, a detailed explanation of the allocation basis and its impact on unit costs is beneficial.#### NoteThis exercise illustrates the significant differences between traditional costing and ABC in accurately distributing overhead costs, thereby enhancing cost management and product pricing strategies. ### Activity-Based Costing (ABC) ExerciseThe total estimated manufacturing overhead of $260,000 was comprised of $160,000 for materials handling costs and $100,000 for purchasing activity costs. Under activity-based costing (ABC):**(Note: Round answers to 2 decimal places, e.g. 12.25)****Question:**What amount of purchasing activity costs are assigned to:(a) One mobile safe: $\_\_\_\_\_\_ each(b) One walk-in safe: $\_\_\_\_\_\_ each

Activity-based costing is a costing approach in which a company's activities are identified and the…

The total estimated manufacturing overhead of $260,000 was comprised of $160,000 for materials handling costs and $100,000 for purchasing activity costs. Under activity-based costing (ABC): (Round answers to 2 decimal places, e.g. 12.25.) What amount of purchasing activity costs are assigned to: (a) (b) One mobile safe One walk-in safe $ $ each each

The total estimated manufacturing overhead of $260,000 was comprised of $160,000 for materials handling costs and $100,000 for purchasing activity costs. Under activity-based costing (ABC): (Round answers to 2 decimal places, e.g. 12.25.) What amount of purchasing activity costs are assigned to: (a) (b) One mobile safe One walk-in safe $ $ each each

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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