Harwell,Inc.produces two different products,Product A and Product B.Harwell uses a traditional volume-based costing system in which direct labor hours are the allocation base.Harwell is considering switching to an ABC system by splitting its manufacturing overhead cost across three activities: Setup,Production,and Finishing.The cost of each activity and usage of the activity drivers are as follows:
Harwell manufactures 10,000 units of Product A and 7,500 units of Product B per month.
Required:
a.Calculate the predetermined overhead rate under the traditional costing system.
b.Calculate the activity rate for Setup.
c.Calculate the activity rate for Production.
d.Calculate the activity rate for Finishing.
e.Calculate the indirect manufacturing costs assigned to each unit of Product A under the traditional costing system.
f.Calculate the indirect manufacturing costs assigned to each unit of Product B under the traditional costing system
g.Calculate the indirect manufacturing costs assigned to each unit of Product A under the ABC system.
h.Calculate the indirect manufacturing costs assigned to each unit of Product B under the ABC system.
i.Which product is under-costed and which is over-costed under the volume-based cost system compared to ABC?

Question

Harwell,Inc.produces two different products,Product A and Product B.Harwell uses a traditional volume-based costing system in which direct labor hours are the allocation base.Harwell is considering switching to an ABC system by splitting its manufacturing overhead cost across three activities: Setup,Production,and Finishing.The cost of each activity and usage of the activity drivers are as follows:
  Harwell manufactures 10,000 units of Product A and 7,500 units of Product B per month.
Required:
a.Calculate the predetermined overhead rate under the traditional costing system.
b.Calculate the activity rate for Setup.
c.Calculate the activity rate for Production.
d.Calculate the activity rate for Finishing.
e.Calculate the indirect manufacturing costs assigned to each unit of Product A under the traditional costing system.
f.Calculate the indirect manufacturing costs assigned to each unit of Product B under the traditional costing system
g.Calculate the indirect manufacturing costs assigned to each unit of Product A under the ABC system.
h.Calculate the indirect manufacturing costs assigned to each unit of Product B under the ABC system.
i.Which product is under-costed and which is over-costed under the volume-based cost system compared to ABC?

Quizplus · Accepted Answer

The Answer of Harwell,Inc.produces two different products,Product A and Product B.Harwell uses a traditional volume-based costing system in which direct labor hours are the allocation base.Harwell is considering switching to an ABC system by splitting its manufacturing overhead cost across three activities: Setup,Production,and Finishing.The cost of each activity and usage of the activity drivers are as follows:
  Harwell manufactures 10,000 units of Product A and 7,500 units of Product B per month.
Required:
a.Calculate the predetermined overhead rate under the traditional costing system.
b.Calculate the activity rate for Setup.
c.Calculate the activity rate for Production.
d.Calculate the activity rate for Finishing.
e.Calculate the indirect manufacturing costs assigned to each unit of Product A under the traditional costing system.
f.Calculate the indirect manufacturing costs assigned to each unit of Product B under the traditional costing system
g.Calculate the indirect manufacturing costs assigned to each unit of Product A under the ABC system.
h.Calculate the indirect manufacturing costs assigned to each unit of Product B under the ABC system.
i.Which product is under-costed and which is over-costed under the volume-based cost system compared to ABC?