A Existing Cost System Two pools Direct Labor 3260015 Overhead 4713982 B System

A existing cost system two pools direct labor 3260015

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A. Existing Cost System: Two pools Direct Labor - $3,260,015 Overhead - $4,713,982 B. System proposed by the accounting manager: Three pools Direct Labor – $3,260,015 Administrative and Technical Overhead – $684,603 Other Overhead (testing rooms) – $4,029,379 (numbers are from exhibit 5) C. System proposed by the consultant: Four pools (one DL and three overhead) Direct Labor – $3,260,015 Administrative and Technical Overhead – $684,603 Main Test Room – $2,103,116 Mechanical Test Room – $1,926,263 (numbers are from exhibit 5) 1
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Step 5. Calculate cost drivers. The direct labor is allocated directly to the lots. The overhead (in either 1, 2 or 3 pools depending on the system) is allocated based on a combination of direct labor dollars and machine hours. Note that these are pre-determined rates based on planned costs and outputs. As a result, Seligram rounds the burden rates somewhat. This is not a good habit to get into, unless a problem tells you to do so. A. Existing Cost System (see exhibit 3): Overhead - $4,713,982/$3,260,015 DL ≈ $1.45/DL$ (Actual Rate) B. System proposed by the accounting manager (see exhibit 5): Administrative and Technical Overhead – $684,603/$3,260,015 DL ≈ $0.20/DL$ Other Overhead (testing rooms) – $4,029,379/50,304 MH ≈ $80/MH C. System proposed by the consultant: Administrative and Technical Overhead – $684,603/$3,260,015 DL ≈ $0.20/DL$
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