Envision Company Uses Activity-Based Costing (ABC) for Allocating Manufacturing Overhead

question 24

Essay

Envision Company uses activity-based costing (ABC) for allocating manufacturing overhead costs to jobs and it has established the following cost drivers and rates:
During July, Job #2005 produced 1,500 units and required the following activity: 1,800 parts, 2 production runs, and 325 direct labor hours.(a.) Calculate the amount of manufacturing overhead applied to Job #2005.(b.) Explain the advantage of using the ABC approach.

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Definitions:

Z-value

A statistical measure representing the number of standard deviations from the mean a data point is.

Lower Limit

The lowest value in a set of data, or the minimum value that a certain variable, function, or sequence can assume.

Specification Limits

Pre-determined bounds that define the acceptable range of variation for a product's characteristics or a process's outputs.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how spread out the values are from the average.