Question

Extracts from cost information of Hebar

Corp​.:

	Simple L3 Pack	Complex L7 Pack	Total
Setup cost allocated using direct laborminus−hours	$ 19 comma 300$19,300	$ 10 comma 700$10,700	$ 30 comma 000$30,000
Setup cost allocated using setupminus−hours	$ 13 comma 200$13,200	$ 16 comma 800$16,800	$ 30 comma 000$30,000

Assuming that

setupminus−hours

is considered a more effective cost drive for allocating setup costs than direct

laborminus−hours.

Which of the following statements is true of​Hebar's setup costs under traditional​ costing?

A.

L3 pack is undercosted by $ 6 comma 100$6,100

B.

L7 pack is undercosted by $ 6 comma 000$6,000

C.

L3 pack is overcosted by $ 6 comma 100$6,100

D.

L7 pack is overcosted by $ 6 comma 100

Answer 1

L3 pack	6100	Overcosted	=19300-13200
L7 Pack	6100	Undercosted	=16800-10700
L3 pack is overcosted by $ 6,100
Option C is correct