If a company decides to pursue new markets with current products, the company would be using the strategy of market penetration. So option c. is correct.
Market penetration is a measure of how much a product or service is being utilized by customers corresponding to the total assessed market for that product or service. Market penetration also associates with the number of potential customers that have purchased a specific company's product rather than a competitor's product. Market development is the system or action steps needed to increase market share or penetration.
Market penetration is not only used on a global and industry-wide scale to estimate the extent of products and services but also is used by companies to evaluate their product's market share.
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Imagine Two Households each with an income of $65,000 per year. Household A consists of two married individuals both 51 years old with one child who is now 27 years old and out of the house. Household B consists of two married individuals who are 31 years old and have three young children, two of which attend day care. The Government in implementing policies to effect Tax Fairness will concentrate on:
Answer: A. The Benefits Principle
Explanation:
According to the Benefits Received principle, people should pay taxes based on the benefits they receive from the government. This is how the government will effect tax fairness.
For example, Household B has three young children, two of which are in day care while Household A does not have any children at that age. Household A and Household B should therefore not pay the same when it comes to educational taxes. Household B should pay more and Household A should pay less because an educated society is beneficial to everyone but to them, only indirectly.
The government, when carrying out tax equity, will focus on the principle of benefits, as shown in option A.
We can arrive at this answer because:
The principle of benefits is considered whenever the government needs to determine the tax rate of citizens.This principle determines that people who use a particular social service must pay a higher tax rate than those who do not use that service.An example of this can be seen in the families presented above, since, in relation to the tax paid to promote national education, both families must be taxed, since the entire population benefits from this service.
However, family B benefits more from this service, as they have three children who need education promoted by the government, unlike family A, who has an adult child and who have already graduated.
According to the principle of benefits, both families must pay taxes for education, but family B must pay a higher tax than family A.
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The law of diminishing returns states that as additional increments of resources ______________, the marginal benefit from those additional increments _______________. Select the correct answer below: are reduced, will decline eventually are added; will decline eventually are added; will increase eventually are reduced; will remain the same
Answer:
are added; will decline eventually
Explanation:
the point of diminishing returns sets in when the optimum capacity has been attained. at this level, increasing production by any extra unit would only bring about little or Fall in output.
if we hold the other factors of production constant/fixed while increasing one input, we will get toa stage where more additions of this input by one unit would only bring about decrease in output or cause output to fall.
therefore in summary this law States that as more increments are added, marginal benefit from increments declines eventually.
St. Augustine Corporation originally budgeted for $360,000 of fixed overhead at 100% of normal production capacity. Production was budgeted to be 12,000 units. The standard hours for production were 5 hours per unit. The variable overhead rate was $3 per hour. Actual fixed overhead was $360,000, and actual variable overhead was $170,000. Actual production was 11,700 units. The fixed factory overhead volume variance is a.$5,500 favorable b.$9,000 unfavorable c.$5,500 unfavorable d.$9,000 favorable
Answer:
YOUUUU TOOOOOO!!!!!!!!!!!!!!!!
Explanation:
Hi this man I was wondering if you had any time today I have a good morning sleep today and I’m just gonna be watching a movie for
According to the video, an interactive website needs to be able to do what things? Check all that apply. invite people to provide information remove unwanted viewers send information, products, and services automatically play videos process payments send viewers to other websites
Answer:
A,C,E
Explanation:
Answer:
A,C,E
Explanation:
Retirement Investment Advisors, Inc., has just offered you an annual interest rate of 6 percent until you retire in 40 years. You believe that interest rates will increase over the next year and you would be offered 6.6 percent per year one year from today. If you plan to deposit $18,000 into the account either this year or next year, how much more will you have when you retire if you wait one year to make your deposit
Answer:
$32,529.54
Explanation:
To determine the answer the difference in future value of the investment options have to be determined
The formula for calculating future value:
FV = P (1 + r)^n
FV = Future value
P = Present value
R = interest rate
N = number of years
First option
$18,000 x (1.06)^40 = $185,142.92
Second option
$18,000 x (1.066)^39 = $217,672.46
Difference in future values = $217,672.46 - $185,142.92 = $32,529.54
The Gorman Group issued $930,000 of 11% bonds on June 30, 2021, for $1,009,794. The bonds were dated on June 30 and mature on June 30, 2041 (20 years). The market yield for bonds of similar risk and maturity is 10%. Interest is paid semiannually on December 31 and June 30. Required: 1. to 3. Prepare the journal entries to record their issuance by The Gorman Group on June 30, 2021, interest on December 31, 2021 and interest on June 30, 2022 (at the effective rate).
Answer:
The Gorman Group
Journal Entries:
June 30, 2021:
Debit Cash $1,009,794
Credit Bonds Liability $930,000
Credit Bonds Premium $79,794
To record the bonds issuance
December 31, 2021:
Debit Interest Expense $50,490
Debit Amortization of Bonds Premium $660
Credit Cash $51,150
To record the payment of semi-annual interest, including amortization of premium.
June 30, 2022:
Debit Interest Expense $50,457
Debit Amortization of Bonds Premium $693
Credit Cash $51,150
To record the payment of semi-annual interest, including amortization of premium.
Explanation:
a) Data and Calculations:
Face value of 11% bonds issue $930,000
Issue price = $1,009,794
Bonds premium = $79,794
Market yield = 10%
December 31, 2021:
Semi-annual interest payment = $51,150 ($930,000 * 5.5%)
Semi-annual Interest expense = $50,490 ($1,009,794 * 5%)
Amortization of bonds premium = $660
June 30, 2022:
Semi-annual interest payment = $51,150 ($930,000 * 5.5%)
Semi-annual Interest expense = $50,457 ($1,009,134 * 5%)
Amortization of bonds premium = $693
According to the most favored nation clause (Article I of GATT), which of the following is true?
A. Tariffs on products imported from countries belonging to the WTO must be lower than tariffs on the same products imported from countries that are not members of the WTO.
B. A country can lower tariffs on imports from countries with most favored nation trading status without changing tariffs on imports from other members of the WTO.
C. If a country gives a trade advantage to one partner, then this advantage must be extended to all its trading partners belonging to the WTO.
D. If a country imposes higher tariffs on one trading partner, then those high tariffs must be imposed on all its trading partners belonging to the WTO.
Answer:
C. If a country gives a trade advantage to one partner, then this advantage must be extended to all its trading partners belonging to the WTO.
Explanation:
The correct option is - C. If a country gives a trade advantage to one partner, then this advantage must be extended to all its trading partners belonging to the WTO.
Reason -
Most-favoured-nation (MFN): treating other people equally Under the WTO agreements, countries cannot normally discriminate between their trading partners. Grant someone a special favour (such as a lower customs duty rate for one of their products) and you have to do the same for all other WTO members.
Corruptco is a large machine shop that fabricates metals. Corruptco maximizes profits and shareholder value by polluting the local river, where fish are often killed off due to the pollution, rather than installing a pollution abatement device. While this is not specifically in violation of the law, it does put burdens on the local community. Which theory of corporate social responsibility is Corruptco exhibiting
Answer: a. the narrow view, or invisible hand theory
Explanation:
When it comes to the narrow view theory of corporate social responsibility, companies put one thing above all else, the maximisation of shareholder wealth.
Any activity that would help them do so - legally - is considered fair game even if it leads to adverse effects. Corruptco is therefore adhering to this theory because they are polluting the the local river to maximize shareholder value.
1. Explain the concept of opportunity cost with an appropriate example.
Answer:
Concept & example of Opportunity Cost
Explanation:
Opportunity Cost is the cost of next best alternative foregone, while choosing an alternative. This arises because of 'choice' problem, due to unlimited wants & limited resources - having alternative uses.
Eg : If I can have 2 chapatis or a bowl of rice. And, I eat a bowl of rice. Then, 'opportunity cost' of a rice bowl is - the next best available '2 chapattis' foregone for the former.
The following refers to units processed by a breakfast cereal maker in August. Compute the total equivalent units of production with respect to conversion for August using the weighted-average inventory method. Units of ProductPercent of Conversion Added Beginning Work in Process230,00060% Units started570,000100% Units completed620,000100% Ending Work in Process180,00070% Multiple Choice 758,000 800,000 620,000 746,000 884,000
Answer:
Equivalent units of production= 746,000 units
Explanation:
Giving the following information:
Units completed 620,000 100%
Ending Work in Process 180,000 70%
The weighted average method blends the costs and units of the previous period with the costs and units of the current period.
Units completed in the period + Equivalent units in ending inventory WIP (units*%completion) = Equivalent units of production
Equivalent units of production= 620,000 + (180,000*0.7)
Equivalent units of production= 746,000 units
The following information is available for Yancey Company: Beginning inventory 600 units at $4 First purchase 900 units at $6 Second purchase 500 units at $7.20 Assume that Yancey uses a periodic inventory system and that there are 700 units left at the end of the month. Compute the cost of ending inventory and the cost of goods sold using the average-cost method.
Answer:
Ending inventory= $4,011
Explanation:
Giving the following information:
Beginning inventory 600 units at $4
First purchase 900 units at $6
Second purchase 500 units at $7.20
First, we need to calculate the weighted-average cost per unit:
Weighted-average cost per unit= (4 + 6 + 7.2) / 3
Weighted-average cost per unit= $5.73
Now, the ending inventory:
Ending inventory= 5.73*700
Ending inventory= $4,011
Livingston Fabrication has created the following aggregate plan for the next five months: August September October November December Forecasted Demand (units of finished goods): 1,500,000 1,500,000 2,000,000 3,000,000 500,000 Production Plan: 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 Assume that Livingston will have nothing in inventory at the end of July. Livingston employs 1,000 production assembly workers and it takes one production assembly worker 5 minutes to assemble one unit of finished good. (The unit is complete at that point.) Each production assembly worker can provide 150 hours of assembly time a month without requiring overtime pay. What will be ending inventory for the month of September?
Answer:
Livingston Fabrication
The ending inventory for the month of September is:
= 600,000 units.
Explanation:
a) Data and Calculations:
August September October November December
Forecasted Demand (units of
finished goods): 1,500,000 1,500,000 2,000,000 3,000,000 500,000
Production Plan: 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
Production capacity = 150 * 60 * 1,000 = 9,000,000 minutes
Minutes required by each assembly worker to assemble 1 unit = 5
Units that can be produced based on capacity = 1,800,000 units (9,000,000/5)
Schedule of Production, Sales, and Ending Inventory:
August September October November December
Beginning inventory 0 300,000 600,000 400,000 (600,000)
Units produced 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000
Demand 1,500,000 1,500,000 2,000,000 3,000,000 500,000
Ending inventory 300,000 600,000 400,000 (600,000) 700,000
The price of Microsoft is $37 per share and that of Apple is $43 per share. The price of Microsoft increases to $42 per share after one year and to $47 after two years. Also, shares of Apple increase to $49 after one year and to $59 after two years. If your portfolio comprises 100 shares of each security, what is your portfolio return in year 1 and year 2
Answer: 13.75% ; 16.48%
Explanation:
Year 0:
Microsoft: Current value = 100 at $37 = $3700
Apple: Current value = 100 at $43 = $4300
Portfolio value = $3700 + $4300 = $8000
Year 1:
Microsoft: value at year 1 = 100 at $42 = $4200
Apple: value at year 1= 100 at $49 = $4900
Portfolio value = $4200 + $4900 = $9100
Year 2:
Microsoft: value at year 2 = 100 at $47 = $4700
Apple: value at year 2 = 100 at $59 = $5900
Portfolio value = $4700 + $5900 = $10600
Therefore, Portfolio returns for year 1 will be:
= (value at the end of year 1 / current value) - 1
= (9100 / 8000) - 1
= 1.1375 - 1
= 0.1375
= 13.75%
Portfolio returns for year 2 will be:
= (value at the end of year 2 / value at the end of year 1) - 1
= (10600 / 9100) - 1
= 16.48%
Which of the following is NOT a likely major for someone planning to go to medical school?
O Zoology
O Biology
O Biochemistry
O Public relations
Answer:
public relations
Explanation:
The other choices are all Science related so they are likely majors but, public relations are not.
Customer: An entity that describes a customer. An instance occurs for unique customers only using name, date of birth, and login name as customer_id primary key.
Online: An entity that describes a customer purchasing activity online. An instance occurs when the customer completes the transaction. Customers can purchase more than once.
Visits: An entity that describes a customer purchase in a physical store. An instance occurs if a customer makes or purchase or checks-in using an app. Customers can visit more than once per day.
Satisfaction: An entity that represents data from a recent customer satisfaction survey. An instance occurs when a customer takes the survey. A customer is tracked by login name and can only take the survey one time.
Use the information to match the following relationships. Answers can be reused more than once.
1. The relationship between Customer and Online.
2. The relationship between Customer and Satisfaction.
3. The relationship between Online and Visits.
4. The relationship between Visits and Satisfaction
A. prototype
B. one-to-one
C. Zero-sum
D. one-to-many
E. TOO many F. many-to-many.
Answer:
1. The relationship between customer and Online - One to one
2. The relationship between customer and Satisfaction - One to many
3. The relationship between online and visits - Many to many
4. The relationship between Visits and satisfaction - Prototype
Explanation:
The relation ship with customer is often one to one. The customers are required to fill the satisfaction surveys which enable the business to understand their value in the eyes of its customers and try to improve their level of service to their customers. The customer satisfaction is important for any business as the satisfied customer may bring more customers.
Built-Tight is preparing its master budget for the quarter ended September 30. Budgeted sales and cash payments for product costs for the quarter follow. July August September Budgeted sales $ 60,000 $ 76,000 $ 52,000 Budgeted cash payments for Direct materials 16,960 14,240 14,560 Direct labor 4,840 4,160 4,240 Factory overhead 21,000 17,600 18,000 Sales are 30% cash and 70% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $15,000 in cash; $45,800 in accounts receivable; and a $5,800 balance in loans payable. A minimum cash balance of $15,000 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries ($4,800 per month), and rent ($7,300 per month).
Part 1 (1) Prepare a cash receipts budget for July, August, and September.
Part 2 (2) Prepare a cash budget for each of the months of July, August, and September. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Enter your final answers in whole dollars.)
Answer:
(1) Total cash receipts:
July = $63,800
August = $64,800
September = $68,800
2-a. Ending Cash Balance:
July = $15,00
August = $21,173
September = $35,873
2-b. Loan Balance End of Month:
July = $2,898
August = $0
September = $0
Explanation:
(1) Prepare a cash receipts budget for July, August, and September.
Note: See part (1) of the attached excel file for the cash receipts budget for July, August, and September.
From the attached excel file, we have:
Total cash receipts:
July = $63,800
August = $64,800
September = $68,800
(2) Prepare a cash budget for each of the months of July, August, and September.
Note: See part (2) of the attached excel file for the cash budget for July, August, and September.
In the attached excel file, the following calculation is made:
July loan repayment = July preliminary cash balance - Minimum cash balance required = $17,902 - $15,000 = $2,902
From the attached excel file, we have:
2-a. Ending Cash Balance:
July = $15,00
August = $21,173
September = $35,873
2-b. Loan Balance End of Month:
July = $2,898
August = $0
September = $0
Exercise 13-07 Nordstrom, Inc. operates department stores in numerous states. Suppose selected financial statement data (in millions) for 2020 are presented below. End of Year Beginning of Year Cash and cash equivalents $ 770 $ 69 Accounts receivable (net) 1,950 1,880 Inventory 810 860 Other current assets 590 331 Total current assets $4,120 $3,140 Total current liabilities $2,030 $1,640 For the year, net credit sales were $8,258 million, cost of goods sold was $5,328 million, and net cash provided by operating activities was $1,251 million. Compute the current ratio, accounts receivable turnover, average collection period, inventory turnover and days in inventory at the end of the current year.
Answer: See explanation
Explanation:
1. Current Ratio = Current Assets / Current Liabilities
= $4,120 / $2030
= 2.03
2. Accounts receivable Turnover:
= Net Credit Sales / Average Accounts Receivables
= 8,258 / (1950+1880 / 2)
= 8258 / 1915
= 4.31
3. Average Collection Period
= 365 / Account Receivable Turnover
= 365 / 4.31
= 84.69 Days
4. Inventory Turnover:
= Cost of Goods Sold / Average Inventory
= 5328 / (810+860 / 2)
= 5328 / 835
= 6.38 times
5. Days in Inventory:
= 365 / Inventory Turnover Ratio
= 365 / 6.38
= 57.21 Days
Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 80 units from beginning inventory and 340 units from the March 5 purchase; the March 29 sale consisted of 40 units from the March 18 purchase and 120 units from the March 25 purchase.
Explanation:
The solution can be made in tabular form as given below for better comprehension. This easily calculates gross profit for each of the four costing methods.
Particulars FIFO LIFO Avg cost Spec. ID
Sales 50900 50900 50900 50900
Cost of goods sold 31800 32920 32248 32540
Gross Profit 19100 17980 18652 18360
. All of the following are elements of the Keynesian economic framework EXCEPT
Answer:
1_multiplier
2_the laffer curve
3_the accelerator
4_the consumption
Comet Company accumulated the following account information for the year: Beginning raw materials inventory $ 5,100 Indirect materials cost 1,100 Indirect labor cost 4,100 Maintenance of factory equipment 1,900 Direct labor cost 6,100 Using the above information, total factory overhead costs equal:
Answer:
See below
Explanation:
Given that ;
Beginning raw materials inventory
= $5,100
Indirect materials cost = $1,100
Indirect labor cost = $4,100
Maintenance of factory equipment = $1,900
Direct labor cost = $6,100
Factory overhead = Indirect materials + indirect labor + maintenance of factory equipment
Factory overhead = $1,100 + $4,100 + $1,900
Factory overhead = $7,100
Complete the journal entries for the following financing transactions.
a. A farmer deposits $350 from a garage sale of personal items into the farm checking account.
b. A farmer pays $100 for groceries with the farm checking account utilities of $65 for the farmer's house is paid with a check from the farm checking account.
c. A farmer culls his cow herd and sells the cows for $3,000 A farmer builds a shed for $7,000
Answer:
The answer is
Explanation:
The answer is ___, because
A $64,000 machine with a 6-year class life was purchased 2 years ago. The machine will now be sold for $50,000 and replaced with a new machine costing $82,000, with a 10-year class life. The new machine will not increase sales, but will decrease operating costs by $9,000 per year. Simplified straight line depreciation is employed for both machines, and the marginal corporate tax rate is 34 percent. What is the incremental annual cash flow associated with the project
Answer:
$6,779
Explanation:
Calculation to determine the incremental annual cash flow associated with the project
First step is to calculate the depreciation
Depreciation=[($64,000/6 years)-($82,000/10 years)
Depreciation=$10,667-$8,200
Depreciation=$2,467
Now let calculate the Incremental annual cash flow
Incremental annual cash flow ={($9,000-$2,467)
-[($9,000-$2,467)*34%]+$2,467}
Incremental annual cash flow =[($6,533-$2,221)+$2,467]
Incremental annual cash flow =$4,312+$2,467
Incremental annual cash flow=$6,779
Therefore the incremental annual cash flow associated with the project is $6,779
Creighton Bicycles and Repair conducted a survey and discovered that among customers who had tried both bike shops, its successful cross-town competition was preferred about 75% of the time. The most frequently cited reason was customer service. This information would be most helpful to introduce to employees during which stage of Lewin's change model
Answer:
Creighton Bicycles and Repair
This information would be most helpful to introduce to employees during Unfreezing stage of Lewin's change model.
Explanation:
The unfreezing stage is the best time to introduce information that challenges the status quo because it will help to prepare Creighton Bicycles and Repair employees to accept that change is inevitable. Creighton Bicycles and Repair should not be satisfied with 75% when it can attain 100% preference for its cross-town competition and other measurable indices. The unfreezing stage convinces organization people that things must change. This information cannot be introduced during the change stage or the refreezing stage.
What is the the impact of corruption on business cycle
Answer:
Corruption diverts talent and resources, including human resources, towards “lucrative” rent-seeking activities, such as defence, rather than productive activities. business, ultimately raising production costs and reducing the profitability of investments. human capital.
Assume the following information for Splish Brothers Corp.
Accounts receivable (beginning balance) $143,000
Allowance for doubtful accounts (beginning balance) 11,470
Net credit sales 950,000
Collections 902,000
Write-offs of accounts receivable 5,500
Collections of accounts previously written off 2,300
Uncollectible accounts are expected to be 9% of the ending balance in accounts receivable.
1. Prepare the entry to record the write-off of uncollectible accounts during the period.
2. Prepare the entries to record the recovery of the uncollectible account during the period.
3. Prepare the entry to record bad debt expense for the period.
A mail-order house uses 16,025 boxes a year. Carrying costs are 46 cents per box a year, and ordering costs are $97. The following price schedule applies. Number of Boxes Price per Box 1,000 to 1,999 $1.35 2,000 to 4,999 1.25 5,000 to 9,999 1.15 10,000 or more 1.10 Click here for the Excel Data File a. Determine the optimal order quantity. (Round your answer to the nearest whole number.) b. Determine the number of orders per year. (Round your answer to 2 decimal places.)
Answer:
a. Optimal order quantity = 2,600 boxes
b. Number of orders per year = 6.16 orders per year
Explanation:
a. Determine the optimal order quantity. (Round your answer to the nearest whole number.)
D = Annual demand = 16,025
O = Ordering cost = $97
C = Carrying costs = 46 cents, or $0.46
Optimal order quantity = Economic order quantity = ((2 * D * O) / C)^0.5 = ((2 * 16,025 * 97 ) / 0.46)^0.5 = 2,600 boxes
b. Determine the number of orders per year. (Round your answer to 2 decimal places.)
Number of orders per year = Annual demand / Economic order quantity = 16,025 / 2,600 = 6.16 orders per year
Suppose the working age population of a fictional economy, Jessica Town, falls into the following categories: 100 are retired homemakers; 50 have full-time employment; 15 have part-time employment; 28 do not have employment but are actively looking for employment; and 16 would like employment but do not have employment and are not actively looking for employment. The official unemployment rate as calculated by the U.S. Bureau of Labor would equal:_________
Answer: 30.1%
Explanation:
The unemployment rate includes those who do not have employment but are actively looking for employment not those who do not have a job and are not looking.
The rate is also based on the Labor force which is the portion of the population that is able and willing to work. Retirees are not included in this measure. Those who are not looking are not willing.
Labor Force = 50 full-time + 15 part-time + 28 unemployed
= 93 people
Unemployment rate:
= 28 / 93 * 100
= 30.1%
Annual Income Statement Data Selected Year-End Balance Sheet Data Sales $ 50,000 Prepaid expenses increase $ 3,000 Expenses: Inventory increase 500 Cost of goods sold 30,000 Accounts payable decrease 1,000 Wages expense 10,000 Amortization expense 1,500 Net income $ 8,500 Prepare the operating activities section of the statement of cash flows for GreenGarden using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)
Answer:
see calculation and working below
Explanation:
operating activities section
Net income $ 8,500
Adjust for changes in non- cash items :
Amortization expense $1,500
Adjust for changes in working capital :
Prepaid expenses increase ($ 3,000)
Inventory increase ($500)
Accounts payable decrease ($1,000)
Net Cash Provided by Operating Activities $5,500
You bought a new game for your PS3, but when you opened the package and used the disk on your machine, it burned out your PS3 and destroyed it as well as creating power short-circuits in your house, which caused a small basement fire. Did you sign an agreement with the game maker that determines the game's warranty, place of jurisdiction, and other important terms?
yes
no
Answer:
nope ps3 is not important
Saddle Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining and machine setup. Presented below is information related to the company's operations.
Standard Custom
Direct labor costs $59,000 $112,000
Machine hours 1,380 1,110
Setup hours 101 370
Total estimated overhead costs are $309,000. Overhead cost allocated to the machining activity cost pool is $200,000 and $109,000 is allocated to the machine setup activity cost pool.
(a) Compute the overhead rate using the traditional (plantwide) approach.
(b) Compute the overhead rates using the activity-based costing approach.
(c) Determine the difference between the two approaches.
Answer:
Saddle Inc.
a) The overhead rate using the traditional (plantwide) approach is:
= $1.81 per direct labor cost.
b) The overhead rates using the activity-based costing approach:
Machining activity = $80.32
Machine setup activity = $231.42
c) The traditional approach overallocated total overhead by $515 than the activity-based approach.
Under the traditional approach, overhead allocated to the Custom product was $27,940 more than under the activity-based approach.
Similarly, under the activity-based approach, overhead allocated to the Standard product was $27,425 more than under the traditional approach.
The difference in the two being the overallocated overhead of $515 stated above.
Explanation:
a) Data and Calculations:
Estimated overhead costs = $309,000
Overhead allocated:
Machining activity = $200,000
Machine setup activity = $109,000
Standard Custom Total
Direct labor costs $59,000 $112,000 $ 171,000
Machine hours 1,380 1,110 2,490
Setup hours 101 370 471
Overhead rate using plantwide approach:
Total overhead/Total direct labor costs
= $309,000/$171,000 = $1.81 per direct labor cost
Overhead rates, using activity-based costing:
Machining activity = $80.32 ($200,000/2,490)
Machine setup activity = $231.42 ($109,000/471)
Overhead Allocation
Standard Custom Total
Plantwide $106,790 $202,720 $309,510
($59,000 * $1.81) ($112,000 * $1.81)
Activity-based:
Machining $110,842 $89,155 $199,997
(1,380 * $80.32) (1,110 * $80.32)
Machine setup 23,373 85,625 108,998
(101 * $231.42) (370 * $231.42)
Total costs $134,215 $174,780 $308,995
Difference $27,425 $27,940 $515