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E4-39B. Compare traditional and ABC allocations on a job (Learning Objective 2) Cornwell Products has adopted an ABC costing system. The following manufacturing activities, indirect manufacturing costs, and cost drivers have been identified: Activity Machine setup Machining Polishing Quality control $ 320,000 Total Estimated MOH Costs Related to Activity $ 180,000 $1,050,000 $ 100,000 Total Estimated Amount of Allocation Base Activity 2,000 setups 12,000 machine hours 5,000 polishing cloths 4,000 tests run Facility-level costs Total manufacturing overhead (MOH). $ 150,000 $1,800,000 50,000 DL hours The Job Cost Record for Job # 804 revealed that direct materials requisitioned for the job totaled $1,250. The Job Cost Record also showed that direct labor for this job totaled 12 hours at a wage rate of $30 per hour. Other data collected on the resources used by Job #804 included: 1 machine setup required 6 machine hours 4 polishing cloths 3 quality control tests run Requirements 1. Calculate the activity cost allocation rate for each of the five pools listed in the table. Machine setup: ($ __) = $_ Machining: ($ _) = $_ Polishing: ($ Quality control: ($ Facility level costs: ($ J = $_ 2. Calculate the total cost of Job # 804 (use an ABC costing system). Job 804: Direct Materials Direct Labor ( xS Manufacturing Overhead Total *Manufacturing overhead: Machine setup: Machine hours: Polishing cloths: Quality control tests: Facility level: Total: $ 3. Why would ABC provide a more accurate allocation of manufacturing overhead (MOH) than a plantwide rate? 4. Assume that Cornwell Products used a traditional costing system rather than an ABC system. Its plantwide MOH rate would have been determined using direct labor (DL) hours as the allocation base. How much cost distortion would have occurred on this job? Plantwide Rate DL Hours MOH for Job 804 Plantwide ABC Cost Distortion Difference Plantwide would have costed the job by $ X / DL Hour

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