Carter,Inc

question 84

Essay

Carter,Inc.produces two different products,Product A and Product B.Carter uses a traditional volume-based costing system in which direct labor hours are the allocation base.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 rate for each activity and usage of the activity drivers 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:

Strategy Formulation

The process of developing plans and actions to achieve organizational goals and strategic objectives.

Marketing Planning

The process of developing strategies for promoting and selling products or services to target audiences.

Contingency Strategy

A plan developed to address potential future events or circumstances that could negatively impact operations or success.

External Strategy

A plan of action that focuses on factors outside an organization to achieve its goals.