cornerstones_chp_6 - May 26, 2011 Accounting 2102 1 Chapter...

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Unformatted text preview: May 26, 2011 Accounting 2102 1 Chapter 6 Activity-Based Costing and Management Before the Amplifier, Inc. Before the Amplifiers operations have grown exponentially since we last saw them in Chapter 4 . . . due to customer demands in the market, they now offer acoustic and electric guitars. Currently, manufacturing overhead is applied to production based on DL hours. However, the new electric guitar line is not as profitable as expected despite high production levels. Management is asking Why?! Why?! May 26, 2011 Accounting 2102 2 lets take a closer look at their operations . . . Before the Amplifier, Inc. Acoustic Electric TOTALS Units Produced 10 100- Total DM and DL costs $800 $8,000- Total DL hours 20 80 Total Machine hours 10 40 Total Setups 3 1 Total Number of Moves 6 4 May 26, 2011 3 Overhead Activity Overhead Cost Assembly $500 Machining $1,500 Setting Up Equipment $1,200 Moving Goods $800 TOTAL MOH $4,000 calculate the POHR under the current traditional system apply overhead to each product in total and on a per unit basis acoustic electric does the applied MOH seem consistent with consumption of overhead resources? Could...
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cornerstones_chp_6 - May 26, 2011 Accounting 2102 1 Chapter...

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