## Overhead Allocation in Manufacturing: Swifty Corporation Case Study### Scenario OverviewSwifty Corporation manufactures safes—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. Part of this analysis involves estimating the amount of overhead to be assigned to each product line. Below is the information relevant to overhead allocation for Swifty’s safes:| | **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 |### Traditional Costing MethodUnder traditional costing, overhead is assigned on the basis of direct labor hours. #### Given:- **Total Estimated Manufacturing Overhead**: $260,000- **Direct Labor Hours**: - Mobile Safes: 800 hours - Walk-in Safes: 1,700 hoursThe overhead cost per unit is calculated as follows:1. **One Mobile Safe**: \[ Overhead \text{ per mobile safe} = \frac{\text{Total overhead} \times \text{(Direct labor hours for mobile safes)}}{\text{Total units of mobile safes}} = \frac{260,000 \times \frac{800}{(800 + 1700)}}{200} = \boxed{416} \]2. **One Walk-in Safe**: \[ Overhead \text{ per walk-in safe} = \frac{\text{Total overhead} \times \text{(Direct labor hours for walk-in safes)}}{\text{Total units of walk-in safes}} = \frac{260,000 \times \frac{1700}{(800 + 1700)}}{50} = \boxed{3536} \]### Activity-Based Costing (ABC)When using Activity-Based Costing (ABC), the total estimated manufacturing overhead of $260,000 is divided based on activities:- **$160,000 for materials handling costs**- **$100,000 for purchasing activity costs**#### Material Handling CostsThe costs

Purchasing activity costs refer to the expenses associated with the procurement process within an…

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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