Question

Carlise Corp., which manufactures ceiling fans, currently has two product lines, the Indoor and the Outdoor. Carlise has total overhead of $136,612.
Carlise has identified the following information about its overhead activity cost pools and the two product lines:
Activity Cost Pools Cost Driver Cost Assigned to Pool Quantity/Amount
Consumed by Indoor Line Quantity/Amount
Consumed by Outdoor Line
Materials handling Number of moves $ 18,661 560 moves 430 moves
Quality control Number of inspections $ 76,590 6,000 inspections 5,100 inspections
Machine maintenance Number of machine hours $ 41,360 22,000 machine hours 25,000 machine hours
Required:
1. Suppose Carlise used a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount.)
Overhead Assigned
Indoor Model ?
Outdoor Model ?
Total ?
2. Calculate the activity proportions for each cost pool in Carlise's ABC system. (Round your answers to 2 decimal places.
Activity Proportions
Indoor Line
Outdoor Line
Materials Handling % ? % ? per Move
Quality Control % ? % ? per Inspection
Maintenance % ? % ? per Machine hour
3. Calculate the amount of overhead that Carlise will assign to the Indoor line if it uses an ABC system.(Round your intermediate calculations to 2 decimal places and round your final answers to the nearest whole dollar amount.)
Indoor Model
Materials Handling ?
Quality Control ?
Maintenance ?
Total Overhead Assigned ?

Answer 1

Answer:

Carlise Corp.

1. Traditional method:

Overhead Assigned

Indoor Model      $63,946    

Outdoor Model  $72,666

Total                   $136,612

2. Activity Proportions

Overhead assigned          Indoor       Outdoor

Materials handling             56.6%      43.4%  per move

Quality control                    54.1%      45.9%  per inspection

Machine maintenance       46.8%     52.2%   per machine hour

3. Overhead assigned using ABC system:

Overhead assigned              Indoor         Outdoor      Total

Materials handling             $10,556         $8,105        $18,661

Quality control                     41,400         35,190         76,590

Machine maintenance        19,360        22,000          41,360

Total overhead assigned  $71,316      $65,295       $136,611

Explanation:

a) Data and Calculations:

Total overhead = $136,612

Activity Cost            Cost Driver          Cost Assigned          Indoor   Outdoor

    Pools                                                 to Pool  

Materials handling Number of moves          $ 18,661             560          430

Quality control       Number of inspections $ 76,590          6,000      5,100

Machine

maintenance        Number of m. hours      $ 41,360         22,000  25,000

Overhead rate based on machine hours:

= $2.91 ($136,612/47,000)

Overhead assigned to each product line:

                                     Indoor     Outdoor

Overhead assigned  $63,946    $72,666

  (22,000/47,000 * $136,612)    ($25,000/47,000 * $136,612)

Overhead rates using activity costing method:

Materials handling $ 18,661/990 = $18.85

Quality control      $ 76,590/11,100 = $6.90

Machine maintenance        $ 41,360/47,000 = $0.88

Overhead assigned              Indoor                Outdoor                Total

Materials handling             $10,556 56.6%      $8,105  43.4%   $18,661

Quality control                     41,400  54.1%       35,190  45.9%   76,590

Machine maintenance        19,360  46.8%     22,000  52.2%    41,360

Total overhead assigned  $71,316  52.2%   $65,295  47.8% $136,611