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:

Consumer Debt

Consumer debt is a type of financial obligation that arises from the purchase of goods that are used for personal, family, or household purposes.

Credit Card Companies

Businesses that issue credit cards to consumers, facilitating electronic payment transactions and extending credit.

Bankruptcy

A judicial process relating to an individual or company that cannot settle their due obligations.

Chapter 11 Reorganization

Chapter 11 Reorganization refers to a provision under the U.S. bankruptcy code that allows a business to restructure its debt and operations in order to return to profitability under court supervision while continuing to operate.