BRIEF EXERCISE 4

BRIEF EXERCISE 4 - BRIEF EXERCISE 4-1 (a) Estimated annual...

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BRIEF EXERCISE 4-1 (a) Estimated annual overhead costs = Predetermined overhead rate Expected annual operating activity $1,000,000 = $10 per direct labor hour 100,000 (b) 90,000 direct labor hours × $10 = $900,000 overhead applied (c) If the manufacturing process is complex, then multiple allocation bases can result in more accurate product-cost computations. In such situations, managers need to consider a new overhead cost allocation method that uses multiple bases. That method is activity- based costing. BRIEF EXERCISE 4-2 Under ABC, overhead costs are shifted from the high-volume products to the low-volume products. This shift results in more accurate costing for two reasons: 1. Low-volume products often require more special handling, such as more machine setups and inspections, than high-volume products. Thus, the low-volume product frequently is responsible for more overhead costs per unit than is a high-volume product. 2.
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BRIEF EXERCISE 4 - BRIEF EXERCISE 4-1 (a) Estimated annual...

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