The Controller for Drisau Company Is Trying to Decide Whether

question 114

Essay

The controller for Drisau Company is trying to decide whether or not the company should switch from the traditional approach of overhead cost allocation to the activity-based costing approach.She has gathered the following overhead data on the company's two products: estimated total overhead,$180,000 (consisting of the $70,000 for setups and $110,000 for assembly); estimated direct labor hours (Product A,6,000; Product B,3,000); estimated number of setups (Product A,750; Product B,1,250); estimated number of machine hours used in assembly (Product A,3,000; Product B,5,000); estimated number of units produced (Product A,500; Product B,200).
Using the traditional approach:
a. Calculate the predetermined overhead rate using direct labor hours as the cost driver.
b. Compute the amount of overhead costs applied to each product in total and per unit.

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Definitions:

Decision Significance

The importance or impact that a decision has on an individual, organization, or situation.

Situational Force

External circumstances or pressures that influence an individual's behavior or decision-making processes.

Group Member Characteristics

The qualities, traits, and behaviors that define the individuals within a group and influence the group's dynamics and performance.

Achievement-Oriented Leadership

A leadership style focused on setting and achieving challenging goals, excellence, and demonstrating high performance.