M43 identlying Cost Drivers 110 QSearch E414 Assigning Co

M4-3 identlying Cost Drivers | + 110% * Q,Search E4-14 Assigning Costs Using Traditional System, ABC System [Lo 4-1,4-3,44,45 Julio produces two types of calculator, standard and deluxe. The move to activity-based costing In preparing for the possible switch, Julio has identified two cost pools: materials handing and setup. The collected dlata follow: x company is currently using a traditiortal costing system with machine hours as the cost driver but is considening a Number of machine hours Number of material moves Number of setups 26,500 625 85 31,500 925 575 Total estimated overhead costs are $382,020, of which $186,000 is assigned to the material handing cost pool and $196.020 is assigned to the setup cost pool Required: 1. Calculate the overhead assigned to each product using the traditional cost system. (Round the overhead rate to four decimal places.) Standard Model 2. Calculate the overhead assigned to each product using ABC Delxe Model De End ns Esc

Solution

1)Total number of machine hours :26500+31500=58000

Predetermined overhead :Estimated overhead /estimated machine hours

              = 382020 / 58000

                  = $ 6.5866 per MH

Standard :26500*6.5866 = $ 174545

deluxe :31500*6.5866 = $ 207477

2)

		Standard	deluxe
Material handling	186000/(625+925)= 120	625*120= 75000	925*120=111000
set up	196020/(85+575)=297	85*297=25245	575*297=170775
Total allocation		100245	281775