Carter,Inc

question 17

Essay

Carter,Inc.uses a traditional volume-based costing system in which direct labor hours are the allocation base.Carter produces two different products: Product A,which uses 100,000 direct labor hours,and Product B,which uses 300,000 direct labor hours.Carter is considering switching to an ABC system by splitting its manufacturing overhead cost of $1,000,000 across three activities: Design,Production,and Inspection.Under the traditional volume-based costing system,the predetermined overhead rate is $2.50/direct labor hour.Under the ABC system,the cost of each activity and proportion of the activity drivers used by each product are as follows:
Required:
a.Calculate the indirect manufacturing costs assigned to Product A under the traditional costing system.
b.Calculate the indirect manufacturing costs assigned to Product B under the traditional costing system.
c.Calculate the indirect manufacturing costs assigned to Product A under the ABC system.
d.Calculate the indirect manufacturing costs assigned to Product B under the ABC system.
e.Which product is under-costed and which is over-costed under the volume-based cost system compared to ABC?

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Definitions:

Social Introversion

A personality trait characterized by a preference for solitary activities and situations above social interactions.

Response Inventories

Tests designed to measure a person’s responses in one specific area of functioning, such as affect, social skills, or cognitive processes.

Face Validity

The extent to which a test or measure appears effective in terms of its stated aims, based on subjective judgment rather than empirical evidence.

Development Cycle

Refers to a series of stages through which a project, product, individual, or organism passes during its lifetime, encompassing phases from initiation to completion or birth to death.