What is the difference in the cost of Widget A, per product, using a traditional labor allocation vs. activity based costing method, assuming the three main cost activities are: Widget A Widget B Total Direct labor hours 300 600 900 Machine hours 100 150 250 Purchase orders = 50 50 100 Here are the summary of fixed costs to consider allocating: Payroll taxes $1,700 Machine maintenance $750 Purchasing Dept. labor $3,500 Fringe benefits $1.500 Purchasing Dept. Supplies $300 Equipment depreciation $1,000 Electricity $1,500 Unemployment insurance $1,300 Traditional method OVER estimates the cost of Product A by $850 O Traditional method UNDER estimates the cost of Product A by $850 O Traditional method OVER estimates the cost of Product A by $1600 O Traditional method UNDER estimates the cost of Product A by $1600
What is the difference in the cost of Widget A, per product, using a traditional labor allocation vs. activity based costing method, assuming the three main cost activities are: Widget A Widget B Total Direct labor hours 300 600 900 Machine hours 100 150 250 Purchase orders = 50 50 100 Here are the summary of fixed costs to consider allocating: Payroll taxes $1,700 Machine maintenance $750 Purchasing Dept. labor $3,500 Fringe benefits $1.500 Purchasing Dept. Supplies $300 Equipment depreciation $1,000 Electricity $1,500 Unemployment insurance $1,300 Traditional method OVER estimates the cost of Product A by $850 O Traditional method UNDER estimates the cost of Product A by $850 O Traditional method OVER estimates the cost of Product A by $1600 O Traditional method UNDER estimates the cost of Product A by $1600
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 9MC: Which is not a step In activity-based costing? A. identify the activities performed by the...
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![What is the difference in the cost of Widget A, per product, using a traditional labor allocation vs. activity based costing method, assuming the
three main cost activities are:
Widget A Widget B
Total
Direct labor hours
300
600
900
Machine hours
100
150
250
Purchase orders =
50
50
100
Here are the summary of fixed costs to consider allocating:
Payroll taxes
$1,700
Machine maintenance
$750
Purchasing Dept. labor
$3,500
Fringe benefits
$1.500
Purchasing Dept. Supplies
$300
Equipment depreciation
$1,000
Electricity
$1,500
Unemployment insurance $1,300
Traditional method OVER estimates the cost of Product A by $850
O Traditional method UNDER estimates the cost of Product A by $850
O Traditional method OVER estimates the cost of Product A by $1600
O Traditional method UNDER estimates the cost of Product A by $1600](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb63ac3d7-178a-4279-927e-6aafc6648944%2F08af06da-1ffc-47f0-9f49-f4848c82d3e4%2Fdxn4r0q_processed.jpeg&w=3840&q=75)
Transcribed Image Text:What is the difference in the cost of Widget A, per product, using a traditional labor allocation vs. activity based costing method, assuming the
three main cost activities are:
Widget A Widget B
Total
Direct labor hours
300
600
900
Machine hours
100
150
250
Purchase orders =
50
50
100
Here are the summary of fixed costs to consider allocating:
Payroll taxes
$1,700
Machine maintenance
$750
Purchasing Dept. labor
$3,500
Fringe benefits
$1.500
Purchasing Dept. Supplies
$300
Equipment depreciation
$1,000
Electricity
$1,500
Unemployment insurance $1,300
Traditional method OVER estimates the cost of Product A by $850
O Traditional method UNDER estimates the cost of Product A by $850
O Traditional method OVER estimates the cost of Product A by $1600
O Traditional method UNDER estimates the cost of Product A by $1600
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