The Controller for Wofford Machining Has Established the Following Overhead

question 68

Essay

The controller for Wofford Machining has established the following overhead cost pools and cost drivers:
A.

B $538,000 /20,000 machine hours = $26.90 per hour;
$26.90 per hour * 850 hours = $22,865
A.Compute the total overhead that should be assigned to order no.715 by using activity-based costing.
B.Suppose that Wofford were to use a single,predetermined overhead rate based on machine hours.Compute the rate per hour and the total overhead assigned to order no.715.
C.Activity-based costing (ABC)uses multiple cost drivers,more closely aligning individual costs with the factors that are creating them.Traditional systems,in contrast,use fewer drivers and therefore result in "lumping" unlike activities (unit-level,batch-level,and so forth)together.The end result is that ABC tends to eliminate the cost distortion that sometimes arises with traditional systems,more specifically,the under- or overcosting of products.
C.Discuss the merits of an activity-based costing system in comparison with a traditional costing system.

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Definitions:

Two-sided Significance Tests

Statistical tests that assess the significance of an effect in either direction, allowing for the evaluation of both positive and negative differences.

Null Hypothesis

A statistical hypothesis that assumes no significant difference or relationship exists between certain parameters or distributions.

SRS

Simple Random Sample, a basic sampling technique in which each member of the population has an equal chance of being included in the sample.

P-value

The probability of observing test results at least as extreme as the results actually observed, under the assumption that the null hypothesis is true.