Solve the below problem:
Q: Dunnstreet produces two types of calculator, standard and deluxe. The company is currently using a traditional costing system with machine hours as the cost driver but is considering a move to activity based costing. In preparing for the possible switch, Dunnstreet has identified two cost pools: materials handling and setup. The collected data follow:
Standard Model |
Deluxe Model |
| Number of machine hours |
25,000 |
|
30,000 |
|
| Number of material moves |
550 |
|
850 |
|
| Number of setups |
80 |
|
500 |
Total estimated overhead costs are $225,000 of which $70,000 is assigned to the material handling cost pool and $155,000 is assigned to the setup cost pool.
Requirement 1:
Calculate the overhead assigned to each product using the traditional cost system. Round the overhead rate to four decimal places if necessary
Requirement 2:
Calculate the overhead assigned to each product using ABC. Round activity rates to four decimal places if necessary.