Computing and using activity-based costing overhead allocation rates Koehler (see Exercise E19-15 and Exercise E19-16) makes handheld calculators in two models—basic and professional—and wants to further refine its costing system by allocating overhead using activity-based costing

Computing and using activity-based costing overhead allocation rates Koehler (see Exercise E19-15 and Exercise E19-16) makes handheld calculators in two models—basic and professional—and wants to further refine its costing system by allocating overhead using activity-based costing. The estimated $721,000 of manufacturing overhead has been divided into three primary activities: Materials Handling, Machine Setup, and Insertion of Parts. The following data have been compiled: Requirement 1 Koehler expects to produce 200,000 basic models and 200,000 professional models. Compute the predetermined overhead allocation rates using activity-based costing. How much overhead is allocated to the basic model? To the professional model? Requirement 2 Compare your answers for Exercise E19-15, Exercise E19-16, and Exercise E19-17. What conclusions can you draw? Note: Short Exercise S19-15 and ES19-16 must be completed before attempting Short Exercise 519-17. Transcribed Image Text: Materials Handiing
Machine Setup
Insertion of Parts
Total
Overhead costs
Allocation base
$ 45,000
Number of parts
$ 540,000
Number of parts
$ 136,000
$ 721,000
Number of setups
Expecced usage:
32 parts per calculator
58 parts per calculator
Basic Model
24 setups per year
32 parts per calculator
Professional Model
58 parts per calculator
44 setups per year

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