Activity_Based_Costing - Activity Based Costing In-Class...

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Activity Based Costing In-Class Example “Iowa Products makes two products in [its] Boone factory. They have used a traditional cost accounting system for the application of overhead [costs] to the products. Currently, they use direct labor hours [DLH] as an application base [i.e. cost driver]. The product Can incurred 150,000 DLH and Bottle incurred 45,000 DLH [during Year 1]. They are considering converting to an activity-based costing system. The estimated data for their Year 1 operations is summerized below: Activity Center OH Cost Cost Driver Activity-level Cans Bottles Units 500,000 cans 150,000 bottles ___________________________________________________________________________________________________________ _ Material handling $480,000 pounds (= lbs.) 100,000 lbs. 60,000 lbs. Production orders $90,000 number of production orders 100 orders 100 orders Production redesign $250,000 number of changes 50 changes 200 changes Plant utilities $2,300,000 machine hours 150,000 MH 80,000 MH 1
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1. Illustration of the overhead application rate under a
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Activity_Based_Costing - Activity Based Costing In-Class...

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