QUESTION13 Freidman Company manufactur ers childrens study d

QUESTION.13 Freidman Company manufactur ers children\'s study desk and chairs. At the end of the year, the following informationis available: Chairs Desks Total Cost Machine Setups 400 1.200 $112,000 Inspections Labor Hours 250 470 $108,000 2,600 2,400 Freidman is considering switching to activity-based costing and moving away from the tradional single overhead rate approach to applying manufacturing overhead You are asked to do the following REQUIRED A Compute total machine setups and inspections costs assigned to each product, using the traditional single overhead rate, labor hours B. Compute total machine setups and inspection costs assigned to each product, using activity based costing. C. Make recommendation as to the better of the two approaches, ABC or the traditional. Be specific TTT Anial Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All Answers

Solution

A. Total machine setup and inspection cost assigned to each product on basis of direct labor hours are as calculated below:

B. Total machine setup and inspection cost assigned to each product by activity-based costing is as calculated below:

C. ABC approach is better.

	Chairs	Desks	Total
Machine setups			112,000
Inspections			108,000
Total Cost (a)			220,000
Labour hours (b)	2,600	2,400	5,000
Predetermined overhead rate (a/b)			44
Cost assigned	2,600*44	2,400*44
114,400	105,600	220,000