Question

E4-14 (Algo) Assigning Costs Using Traditional System, ABC System (LO 4-1, 4-3, 4-4,4-5) Julio produces two types of calculator, standard and deluxe. The company is currently using a traditional costing system with machine hours as the cost driver but is considering a move to activity-based costing. In preparing for the possible switch, Julio has identified two cost pools materials handling and setup. The collected data follow: Standard Model 26,800 Deluxe Model 31,800 Number of machine hours Number of material moves Number of setups 640 940 590 120 Total estimated overhead costs are $403,310, of which $189,600 is assigned to the material handling cost pool and $213,710 is assigned to the setup cost pool. Required: 1. Calculate the overhead assigned to each product using the traditional cost system. 2. Calculate the overhead assigned to each product using ABC. Complete this question by entering your answers in the tabs below. Required Required Calculate the overhead assigned to each product using the traditional cost system. (Round the overhead rate to four decimal places and round your final answer to the nearest whole dollar amount.) Overhead Assigned Standard Model Deluxe Model Required Required 2 >

Answer 1

	Overhead assigned
Standard Model	$                     1,84,448
Deluxe Model	$                     2,18,860
	Overhead assigned
Standard Model	$                     1,12,920
Deluxe Model	$                     2,90,390
Workings:
Traditional cost system:
Predetermined overhead rate	=	Total overhead / Total Machine hours
	=	$403310 / (26800 + 31800)
	=	$          6.8824
	Total Machine hours	Predetermined overhead rate	Overhead assigned
	(i)	(ii)	(i) X (ii)
Standard Model	26,800	$          6.8824	$         1,84,448
Deluxe Model	31,800	$          6.8824	$         2,18,860
Activity based costing:
Predetermined overhead rate	=	Total overhead / Total Machine hours
	=	$403310 / (26800 + 31800)
	=	$          6.8824
	Number of Material moves	Weight	Overhead cost	Number of Setups	Weight	Overhead cost	Total overhead assigned
	(i)	(ii)	(i) X (ii) = (a)	(iii)	(iv)	(iii) X (iv) = (b)	(a) + (b)
Standard Model	640	$          0.4051	$             76,800	120	$ 0.1690	$             36,120	$ 1,12,920
Deluxe Model	940	$          0.5949	$         1,12,800	590	$ 0.8310	$         1,77,590	$ 2,90,390
	1580	$          1.0000	$         1,89,600	710	$ 1.0000	$         2,13,710	$ 4,03,310