70.2K

Verified Solution

Link Copied!

Snowden Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate overhead costs. It has identified four activity pools. Relevant information follows: Activity Pools Cost Pool Total Cost Driver Repair and maintenance on assembly machine $ 104,500 Number of units produced Programming cost 143,500 Number of programming hours Software inspections 14,000 Number of inspections Product testing 18,000 Number of tests Total overhead cost $ 280,000 Expected activity for each product follows: Number of Units Number of Programming Hours Number of Inspections Number of Tests Decoder P 16,500 1,500 304 2,240 Decoder Q 38,500 1,000 96 1,760 Total 55,000 2,500 400 4,000 Assume that before shifting to activity-based costing, Snowden Industries allocated all overhead costs based on direct labor hours. Direct labor data pertaining to the two decoders follow: Direct Labor Hours Decoder P 6,000 Decoder Q 14,000 Total 20,000 Required Compute the amount of overhead cost allocated to each type of decoder when using direct labor hours as the allocation base. Determine the cost per unit for overhead when using direct labor hours as the allocation base and when using ABC

Answer & Explanation Solved by verified expert

See Answer