HW 5 - 102B.pdf - HW#5 Q 7-1 7-2 E 7-5 7-6 7-7 7-8 P7-18 Questions 7-1 Why is direct labor a poor base for allocating overhead in many companies 1 With

HW 5 - 102B.pdf - HW#5 Q 7-1 7-2 E 7-5 7-6 7-7 7-8 P7-18...

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HW #5 Q: 7-1, 7-2 E: 7-5, 7-6, 7-7, 7-8, P7-18 Questions 7-1: Why is direct labor a poor base for allocating overhead in many companies? 7-2: Why are top management support and cross-functional involvement crucial when attempting to implement an activity-based costing system? Exercises 7-5: Thermal Rising, Inc. makes paragliders for the sale through specialty sporting good stores. Using the company’s activity-based costing system, compute the customer margin of Big Sky Outfitters. Sales ($1,850*20) +($2,400*3) $44,200 Costs: Direct Materials ($564*20) + ($634*3) 13,182 Direct Labor (Labor hours per glider * labor rate) 11,915 Supporting Direct Labor (Labor hours per glider * # gliders * supporting labor rate) 15,886 Order Processing (# orders * per order cost) 1,136 Custom-Design (# custom design * per custom 558
Customer Margin: $44,200 - $43,056 = $1,144

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