A company has traditionally allocated its overhead based on machine hours but collected this information to change to activity-based costing: Estimated Activity Activity Centre Product 1 Product 2 Estimated Cost Machine setups 10 15 $50,000 Assembly parts 1,000 1,500 75,000 Packaging units 500 300 80,000 Machine hours per unit 1 1.5 Production volume 2,000 2,000 Required: a) How much overhead would be assigned to each unit under the traditional allocation method? b) How much overhead would be assigned to each unit under activity-based costing? c) Compared to ABC costing, determine each product’s amount of under- or overapplied overhead.d) Is ABC suited to service businesses? Explain with appropriate examples.

A company has traditionally allocated its overhead based on machine hours but collected this information to change to activity-based costing: Estimated Activity Activity Centre Product 1 Product 2...

A company has traditionally allocated its overhead based on machine hours but collected this information to change to activity-based costing:

Required:

a) How much overhead would be assigned to each unit under the traditional allocation method?

b) How much overhead would be assigned to each unit under activity-based costing?

c) Compared to ABC costing, determine each product’s amount of under- or overapplied overhead.

d) Is ABC suited to service businesses? Explain with appropriate examples.

Jun 09, 2022