Cocoa Pet Corporation Manufactures Two Models of Grooming Stations, a Standard

question 132

Essay

Cocoa Pet Corporation manufactures two models of grooming stations, a standard and a deluxe model.
The following activity and cost information has been compiled:
Required:
Assume a traditional costing system applies the $80,000 of overhead costs based on direct labour hours.
a. What is the total amount of overhead costs assigned to the standard model?
b. What is the total amount of overhead costs assigned to the deluxe model?
Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead.
c. What is the total amount of indirect costs assigned to the standard model?
d. What is the total amount of indirect costs assigned to the deluxe model?
e. Explain the difference between the costs obtained from the traditional costing system and the ABC system. Which system provides a better estimate of costs? Why?

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Definitions:

Nail Polish

A cosmetic product applied to fingernails or toenails to color, protect, or enhance their appearance.

Circular-Flow Diagram

An economic diagram that maps out the journey of money as it passes through markets, involving both households and businesses.

Household

An economic unit consisting of all the individuals who live together in one housing arrangement.

Market

A venue or mechanism through which buyers and sellers interact to trade goods, services, or securities.