90.2K

Verified Solution

Link Copied!

Churchill Products is considering updating its cost system to an activity-based costing system and is interested in understanding the effects. The company's cost accountant has identified three overhead cost pools along with appropriate cost drivers for each pool. Cost Pools Utilities Scheduling and setup Material handling Costs $1,350,000 1,350,000 3,600,000 Activity Drivers 90,000 machine-hours 900 setups 2,400,000 pounds of material The company manufactures three models of water basins (Oval, Round, and Square). The plans for production for the next year and the budgeted direct costs and activity by product line are as follows. Total direct costs material and labor) Total machine-hours Total number of setups Total pounds of material Total direct labor-hours Number of units produced Oval $240,000 45,000 120 750,000 4,800 6,000 Products Round $240,000 15,000 450 450,000 2,700 3,000 Square $ 240,000 30,000 330 1,200,000 7,500 9,000 Required: a. The current cost accounting system charges overhead to products based on direct labor-hours. What unit product costs will be reported for the three products if the current cost system continues to be used? c. What are the cost driver rates for the three cost pools identified by the cost accountant? d. What unit product costs will be reported for the three products if the ABC system suggested by the cost accountant's classification of cost pools is used? e. If management should decide to implement an activity-based costing system, what benefits should it expect? Complete this question by entering your answers in the tabs below. Required A Required C Required D Required E The current cost accounting system charges overhead to products based on direct labor-hours. What unit product costs will be reported for the three products if the current cost system continues to be used? (Round "Per unit cost" answers to 2 decimal places.) Total cost Per unit cost $ $ Oval 2,256,000 376.00 $ $ Round 1,374,000 458.00 $ $ Square 3,390,000 376.66 Required A Required C >

Answer & Explanation Solved by verified expert

See Answer