Use the following information to answer Problems below:
Old'n'New (ON) is a well-established manufacturing company that produces vintage furniture. ON has used direct labor hours as the basis for allocating company-wide overhead for many years. However, given recent investments in manufacturing technologies, management feels that ABC costing would perhaps provide a more accurate assessment of the true price of the goods produced. The following costs have been accumulated and corresponding drivers measured:
Additionally, the following information is available relative to production levels:

-In addition to evaluating costs, ON's management wants to evaluate the overall profitability of its customers. Below is an analysis of several of ON's customers, their purchasing habits, and related costs:
Chairs are sold for $250 each, and tables are sold for $850 each. The materials required for a chair are $15, and for a table are $50. Direct labor is paid at a rate of $15/hour.
Which customer is most profitable under ABC costing?

Question

Use the following information to answer Problems below: 
Old'n'New (ON) is a well-established manufacturing company that produces vintage furniture. ON has used direct labor hours as the basis for allocating company-wide overhead for many years. However, given recent investments in manufacturing technologies, management feels that ABC costing would perhaps provide a more accurate assessment of the true price of the goods produced. The following costs have been accumulated and corresponding drivers measured:
  Additionally, the following information is available relative to production levels:
 
-In addition to evaluating costs, ON's management wants to evaluate the overall profitability of its customers. Below is an analysis of several of ON's customers, their purchasing habits, and related costs:
  Chairs are sold for $250 each, and tables are sold for $850 each. The materials required for a chair are $15, and for a table are $50. Direct labor is paid at a rate of $15/hour.
Which customer is most profitable under ABC costing?

Quizplus · Accepted Answer

The Answer of Use the following information to answer Problems below: 
Old'n'New (ON) is a well-established manufacturing company that produces vintage furniture. ON has used direct labor hours as the basis for allocating company-wide overhead for many years. However, given recent investments in manufacturing technologies, management feels that ABC costing would perhaps provide a more accurate assessment of the true price of the goods produced. The following costs have been accumulated and corresponding drivers measured:
  Additionally, the following information is available relative to production levels:
 
-In addition to evaluating costs, ON's management wants to evaluate the overall profitability of its customers. Below is an analysis of several of ON's customers, their purchasing habits, and related costs:
  Chairs are sold for $250 each, and tables are sold for $850 each. The materials required for a chair are $15, and for a table are $50. Direct labor is paid at a rate of $15/hour.
Which customer is most profitable under ABC costing?

Use the Following Information to Answer Problems Below