Rachel's Pet Supply Corporation Manufactures Two Models of Grooming Stations,a

question 124

Essay

Rachel's Pet Supply Corporation manufactures two models of grooming stations,a standard and a deluxe model.The following activity and cost information has been compiled:
$\begin{array}{lrrr}&\text { Number of }&\text { Number of }&\text { Number of } \\\text { Product }&\text { Setups }&\text { Components }&\text { Direct Labor Hours }\\\text { Standard } & 3 & 30 & 650 \\\text { Del wixe } & 7 & 50 & 150 \\\text { Overhead costs } & \$ 40,000 & \$ 120,000\end{array}$ Assume a traditional costing system applies the $160,000 of overhead costs based on direct labor 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 overhead costs assigned to the standard model?
d.What is the total amount of overhead 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:

Rationalization

A defense mechanism in which controversial behaviors or feelings are justified and explained in a seemingly rational or logical manner to avoid the true explanation.

Corporation

A corporation is a legal entity that is separate from its owners, providing them with limited liability. It is capable of owning assets, borrowing money, and being sued or suing.

Conflict

A struggle or contest between people with opposing needs, ideas, beliefs, values, or goals.

Mediate

To intervene in a dispute in order to resolve it or bring about a settlement.