Extracts from cost information of Hebar Corp.:

Assuming that setup-hours is considered a more effective cost drive for allocating setup costs than direct labor-hours. Which of the following statements is true of Hebar's setup costs under traditional costing?
A) L3 pack is undercosted by $5,850
B) L7 pack is undercosted by $5,750
C) L3 pack is overcosted by $5,850
D) L7 pack is overcosted by $5,850

Question

Extracts from cost information of Hebar Corp.:

Assuming that setup-hours is considered a more effective cost drive for allocating setup costs than direct labor-hours. Which of the following statements is true of Hebar's setup costs under traditional costing?
A) L3 pack is undercosted by $5,850 
B) L7 pack is undercosted by $5,750 
C) L3 pack is overcosted by $5,850 
D) L7 pack is overcosted by $5,850

Quizplus · Accepted Answer

Setup cost allocated using direct labor-hours - Setup cost allocated using setup-hours
= $19,250 - $13,400 = $5,850

Extracts from Cost Information of Hebar Corp