Lampierre makes brass and gold frames. The company computed this information to decide whether to switch from the traditional allocation method to ABC: Brass Gold
Units planned 750 125
Material moves 400 100
Machine setups 400 600
Direct labor hours 700 1.200
The estimated overhead for the material cost pool is estimated as $12.500, and the estimate for the machine setup pool is $35.000. Calculate the allocation rate per unit of brass and per unit of gold using:
A. The traditional allocation method.
B. The activity-based costing method
Portable Seats makes two chairs: folding and wooden. This information was obtained to review the decision to consider ABC:
Wooden Chairs Folding Chairs Total Cost
Material requisitions 200+ 500+ $55,000
Inspections 50 150 25.000
Labor hours 2.400 2,600
Compute the overhead assigned to each product under:
1. The traditional allocation method.
2. The activity-based costing method.
Grainger Company produces only one product and sells that product for $100 per unit. Cost information for the product is:
Direct Material $15 per Unit
Direct Labor $25 per Unit
Variable Overhead $5 per Unit
Fixed Overhead $34,000
Selling expenses are 54 per unit and are all variable. Administrative expenses of $20,000 are all foxed. Grainger produced 5,000 units, sold 4,000, and had no beginning inventory.
A Compute net income under:
1. absorption costing.
2. variable costing.
B. Reconcile the difference between the income under absorption and variable costing.