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Monrovia: cost accounting

Monrovia Corporation manufactures two models of its product named "Model One" and "Model Two." In the past, Monrovia had been using a traditional overhead allocation system based solely on machine hours. Total overhead costs were estimated as follows:

..............................................Estimated
Activity................................Overhead Cost
Automated Assembly.............$189,000
Parts Management.................$63,000
TOTAL...................................$252,000

Monrovia has decided to switch to an activity-based costing system using two activity
cost pools. Information related to the new system is as follows:
Activity Estimated
Activity................................Measure....................Activity
Automated Assembly......machine hours........7,000 machine hours
Parts management...........part numbers.........100 part numbers
Actual activity for the year for the two models were as follows:
Units of
Product Machine Part
Produced..........Hours.......Used.........Numbers Used
Model One.........300.........2,400..................70
Model Two.........900.........4,800..................30

A. If Monrovia was still using its traditional system, how much overhead cost would have been assigned to the production of Model One?
B. Under the new activity-based costing system, how much overhead cost
would Monrovia assign to the production of Model Two?
C. If Monrovia's actual overhead cost was $250,000, what would total underapplied or overapplied overhead be for the year under the traditional system?
D. If Monrovia's actual overhead cost was $250,000, what would total underapplied or overapplied overhead be for the year under the new activity based costing system?

Solution Summary

This solution goes through cost accounting using the example of Monrovia corporation.

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