B-20.09 Problem

B-20.09 Problem - (a) Apply activity-based costing and...

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B-20.09 Sand Castle Manufacturing produces concrete yard art. 2,500 concrete seahorses were produced in a recent production run. The run required 1,250 machine hours, and also required five "set-ups" of mixing equipment. Final inspection required 50 hours of inspection activity. Estimated overhead is estimated at $30 per machine hour, plus $2,750 per "set-up" and $25 per inspection hour. Direct materials and direct labor total $75 per seahorse.
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Unformatted text preview: (a) Apply activity-based costing and determine the amount assigned to a concrete seahorse. (b) For GAAP purposes, Sand Castle applies traditional costing methods, and allocates overhead at $50 per machine hour. How much cost would be assigned to the 2,500 seahorses? What is the per unit cost of a seahorse under the traditional approach? What might explain the higher cost assignment, and how could this influence business decision making?...
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