Quiz 4: Activity-Based Costing

Business

Seco, Inc., produces two types of cloth dryers and uses a plant wide rate based on direct labor hours to assign its over head costs. From the information given in the question the following is calculated: 1.Plant wide rate is, img Applied overhead for Deluxe dryer is img Applied overhead for Regular dryer is img 2.The overhead cost per unit for deluxe dryer is img The overhead cost per unit for regular dryer is img 3.Given that deluxe product used 20,000 hours instead of 10,000 hours then the applied overhead increases to img Hence, the profitability would also decrease by this amount.

At the beginning of the year, a predetermined overhead rate is calculated using the following formula: img Predetermined overhead rates are used as actual production and overhead costs are not incurred uniformly throughout the year. Management need cost information all the year round and cannot wait until the end of the year to allocate overheads based on actual cost data.

The past year's data of Warner Company is given: 1.Given: img Over head variance is img img 2.On proration as per the balances given: img img Unadjusted img 3. img img