Explore BrainMass

Explore BrainMass

    Overhead allocation: Traditional v ABC costing

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Acme Enterprises has identified the following overhead costs and cost drivers for the coming year:

    Overhead Item Cost Driver Budgeted Cost Budgeted Activity Level
    Quality Number of inspections $125,000 2,500
    Engineering Engineering hours 100,000 2,500
    Machine setup Setup hours 90,000 400
    Material handling Number of material moves 85,000 1,000

    Budgeted direct labor cost was $200,000 and budgeted direct material cost was $300,000. The following information was collected on three jobs that were completed during the month:

    Job A Job B Job C
    Direct materials $5,000 $2,800 $8,000
    Direct labor $4,000 $4,000 $8,000
    Units completed 200 100 300
    Number of inspections 20 10 20
    Number of material moves 60 20 80
    Engineering hours 10 50 10
    Number of setups 13 25 18

    Required: (25 Points)

    a. If the company uses traditional costing and allocates overhead using direct labor cost, how much overhead cost should be assigned to Job A, B, and C?
    b. If the company uses activity-based costing (ABC), how much overhead cost should be assigned to Job A, B, and C?

    © BrainMass Inc. brainmass.com June 4, 2020, 4:59 am ad1c9bdddf
    https://brainmass.com/business/cost-allocation-of-service-department-costs/overhead-allocation-traditional-versus-abc-costing-591589

    Solution Summary

    This solution answers questions regarding traditional costing and activity-based costing. Concepts addressed include traditional costing and activity-based costing.

    $2.19

    ADVERTISEMENT