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

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

Step-by-step 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