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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 Traditional method UNDER estimates the cost of Product A by $850 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 Traditional method UNDER estimates the cost of Product A by $850 Traditional method OVER estimates the cost of Product A by $1600 O Traditional method UNDER estimates the cost of Product A by $1600

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
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 Traditional method UNDER estimates the cost of Product A by $850 Traditional method OVER estimates the cost of Product A by $1600 O Traditional method UNDER estimates the cost of Product A by $1600
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 Traditional method UNDER estimates the cost of Product A by $850 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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