Carlise has identified the following information about its overhead activity pools and the two product lines:
Activity Pools Cost Driver Cost Assigned to Pool Quantity or Amount Consumed by Indoor Line Quantity or Amount Consumed by Outdoor Line
Materials handling Number of moves $ moves moves
Quality control Number of inspections $ inspections inspections
Machine maintenance Number of machine hours $ machine hours machine hours
Required:
Suppose Carlise used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line.
Calculate the activity proportions for each activity pool in Carlises ABC system.
Calculate the amount of overhead that Carlise will assign to the Indoor line if it uses an ABC system.
Determine the amount of overhead Carlise will assign to the Outdoor line if it uses an ABC system.
Compare the results for a traditional system with an ABC system. Which do you think is more accurate?
