Homework SourseDeannas Draperies makes custom draperies for homes and busin
Deanna\'s Draperies makes custom draperies for homes and businesses. The company uses a traditional overhead application system basing it on the total yards of fabric used. The company wishes to use an activity-based costing system. Deanna\'s has provided the following data concerning its annual overhead costs and its activity cost pools. PLEASE HELP ME UNDERSTAND THIS! THANKS
Indirect Labor and Materials
$240,000
Other Indirect Costs
160,000
Total Overhead Costs
$400,000
Distribution of Resource Consumption:
Activity Cost Pool
Production
Installation
Customer
Support
Other
Total
40%
30%
20%
10%
100%
50%
30%
10%
10%
100%
The \"Other\" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The total amount of the activity for the year is as follows: Production - 4,000 yards; Installation - 200 Jobs; Customer Support - 100 Customers; and Other - Not applicable.
Darla Samson, one of Deanna\'s customers, had one job completed during the year that involved 60 yards of drapery fabric and has direct materials and direct labor cost of $1,500. The sales revenue from this job is $5,200.
REQUIRED: Complete the items below and then answer the related questions by matching the amount with the related item.
Part 1: Traditional Method
Compute the traditional overhead rate
Compute the overhead to be applied to the Darla Samson job
Compute the total cost to be applied to the Darla Samson job.
Part 2: Activity-Based Costing Method (Tables have been created for A. and B. below)
Prepare the first-stage allocation (see table below)
Compute the activity rates
Copmute the overhead to be applied to the Darla Samson job
Compute the total cost to be applied to the Darla Samson job
Part 3: Is the Darla Samson job over- or under- costs, using the traditional overhead application system?
Table for First-Stage Allocation
Production
Installation
Customer
Support
Other
Total
Traditional: Overhead to be Applied to Darla Samson\'s Job
ABC: Other Indirect Costs Allocated to Production
ABC: Other Indirect Costs Allocated to Other
ABC: Total Costs Allocated to Other
ABC: Activity Rate for Other
ABC: Total Cost Applied to Darla Samson\'s Job
Is Darla Samson\'s job over-costed or under-costed when using the traditional method?
$3,880.00
$48,000.00
$176,000.00
$80,000.00
Over-Costed
$100.00
$72,000.00
$600.00
$640.00
$120,000.00
$24,000.00
$64,000.00
$44.00
$16,000.00
$40,000.00
$6,000.00
$5,380.00
$7,500.00
Not Applicable
$96,000.00
| Overhead Costs: | |
| Indirect Labor and Materials | $240,000 |
| Other Indirect Costs | 160,000 |
| Total Overhead Costs | $400,000 |
Solution
If any doubt please comment
| Part 1 | ||||
| Traditional overhead rate | 100 | |||
| 400000/4000 | ||||
| Traditional: Overhead to be Applied to Darla Samson\'s Job | ||||
| 60*100 | $6,000 | |||
| total cost to be applied to the Darla Samson job. | ||||
| Direct Material & Labor | $1,500 | |||
| Overhead | $6,000 | |||
| Total cost | $7,500 | |||
| Part 2 | ||||
| Production | Installation | Customer | Other | |
| Support | ||||
| Indirect Labor and Material | 96000 | 72000 | 48000 | 24000 |
| (240000*40%) | (240000*30%) | (240000*20%) | (240000*10%) | |
| Other Indirect Costs | 80000 | 48000 | 16000 | 16000 |
| (160000*50%) | (160000*30%) | (160000*10%) | (160000*10%) | |
| Total T | 176000 | 120000 | 64000 | 40000 |
| Activity Driver A | 4000 | 200 | 100 | NA |
| Activity rate T/A | 44 | 600 | 640 | |
| Overhead to be Applied to Darla Samson\'s Job | ||||
| Production (44*60) | 2640 | |||
| Installation | 600 | |||
| customer | 640 | |||
| Overhead applied | 3880 | |||
| total cost to be applied to the Darla Samson job. | ||||
| Direct Material & Labor | $1,500 | |||
| Overhead | $3,880 | |||
| Total cost | $5,380 | |||
| Part 3 | ||||
| It is over cost using traditional overhead application system as overhead applied in | ||||
| traditional is mor ethan ABC | ||||
| Correct Option | ||||
| Traditional: Overhead to be Applied to Darla Samson\'s Job | Option P $6000 | |||
| ABC: Other Indirect Costs Allocated to Production | Option O $40000 | |||
| ABC: Other Indirect Costs Allocated to Other | Option N $16000 | |||
| ABC: Total Costs Allocated to Other | Option O $40000 | |||
| ABC: Activity Rate for Other | S Not applicable | |||
| ABC: Total Cost Applied to Darla Samson\'s Job | Q:5380 | |||
| Is Darla Samson\'s job over-costed or under-costed when using the traditional method? | E Over cost | |||
