Question :
Julio produces two kinds of calculator, standard and deluxe. The company is presently using a traditional costing system with machine hours as the cost driver but is considering a move to activity-based costing. In preparing for the possible switch, Julio has recognized two cost pools: materials handling and setup. The collected data follow:
Standard Model Deluxe Model
Number of machine hours: 57,500 60,000
Number of material moves: 580 780
Number of setup:s 120 725
Total estimated overhead costs are $503,250, of which $224,400 is assigned to the material handling cost pool and $278,850 is assigned to the setup cost pool.
Required :
1. Determine the overhead assigned to each product using the traditional cost system.
2. Evaluate the overhead assigned to each product using ABC