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tiny-mole [99]
3 years ago
8

EcoFabrics has budgeted overhead costs of $945,000. It has allocated overhead on a plantwide basis to its two products (wool and

cotton) using direct labor hours which are estimated to be 450,000 for the current year. The company has decided to experiment with activity-based costing and has created two activity cost pools and related activity cost drivers. These two cost pools are cutting (cost driver is machine hours) and design (cost driver is number of setups). Overhead allocated to the cutting cost pool is $360,000, and $585,000 is allocated to the design cost pool.Additional information related to these pools is as follows:Machine hours wool: 100,000Number of set ups wool: 1,000Machine hours cotton: 100,000Number of set ups cotton: 500Machine hours total: 200,000Number of setups total: 1,500The amount of overhead allocated to the wool product line and the cotton product line using activity-based costing & traditional approach is as follows:ABC wool: $570,000Traditional wool: $472,500ABC cotton: $375,000Traditional cotton: $472,500Required:How does allocation using the traditional approach compare with the amount allocated using ABC?
Business
1 answer:
rjkz [21]3 years ago
8 0

Answer:

The main advantage of using ABC costing method is that it is more exact than traditional costing, and overhead costs are generally allocated on different basis (cost drivers) which results in a more fair distribution.  

In this case, overhead costs allocated based solely on direct labor hours might be over or under stated since certain manufacturing procedures might require a lot of labor but few machines, while others might require few labor and a lot of machines.

Cutting is done mostly by machines while design is done mostly by employees. Allocating cutting overhead costs based on machine hours makes sense. Since both wool and cotton require the same amount of machine hours, cutting costs are allocated equally between them.

On the other hand, design is carried out by employees, so allocating design costs based on set ups (which is also carried out by employees) makes sense. That is why most of design costs are allocated to wool (wool requires 67% of setups).

Before under the traditional method, overhead costs were allocated evenly, but once we start allocating them based on more real cost drivers, the total amounts change.

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Evaluating risks

Once risks are identified you determine the likelihood and consequence of each risk. You develop an understanding of the nature of the risk and its potential to affect project goals and objectives. This information is also input to your Project Risk Register.

4 0
3 years ago
Indicate whether each of the following transactions represents an increase in net exports, a decrease in net exports, an increas
iris [78.8K]

Answer:

(a). A worker at a Sony plant in Japan buys some Georgia peaches from an American farmer.

-<u> Increase in exports while no change in imports</u>.

(b). The Sony pension fund buys a bond from the U.S. Treasury.

- <u>Decrease in a net outflow of capital. Thus, it would be considered as a negative inflow/outflow</u>.

(c). An American investor buys a controlling share in a South Korean electronics firm.

- <u>Increase in Net Capital outflow for the U.S</u>.

Explanation:

Exports are described as the selling of domestic goods to a foreign country while Imports are characterized as the process of bringing in foreign goods to the domestic country. And Capital outflow is defined as the exact flow of funds from domestic to foreign and foreign to the domestic country.

In the first case, the purchase reflects a rise in exports as the domestic product is sold to the foreign country. In the second situation, the net outflow of the capital would decreases as it demonstrates a foreign purchase of a domestic asset. In the third example, the American investors' purchase of a South Korean firm demonstrates a domestic purchase of a foreign asset and thus, the net capital outflow would rise.

7 0
3 years ago
Multiple-step income statements show
devlian [24]

Answer:

both income from operations and gross profit.

Explanation:

As we know that

The income statement recognized the revenues earned and the expenses incurred for a particular period

And the multiple-step income statement refers to the classification of expenses like

The format is shown below:

Sales                                   XXXXX

Less: Cost of goods sold  XXXXX

Gross profit                        XXXXX

Less: Operating expenses

Administrative expenses     XXXXX

Selling expenses                  XXXXX

Operating income                 XXXXX

Non operating income or others

Less: Interest expense           XXXXX

Rent revenue                          XXXXX

Net income                             XXXXX

Therefore, the third option is correct

4 0
3 years ago
A stock with a current market price of $50 and a strike price of $45 has an associated put option priced at $3.50. This put has
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Answer:

The answer is D

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Intrinsic value can be found by simply using the following formula

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this gives,

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A put intrinsic value cannot be vegetative as it can be exercised right now at the current price. Thus it is interpreted as 0.

Time value is calculated as follows

Time Value = Option Price - Intrinsic Value

This gives   TV = $3.5 - $0 = $3.5

Hope this helps.

6 0
3 years ago
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Answer:

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Explanation:

6 0
3 years ago
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