Brilliant Accents Company manufactures and sells three styles of kitchen faucets: Brass, Chrome, and White.Production takes 25, 25, and 10 machine hours to manufacture 1,000-unit batches of brass, chrome and white faucets, respectively.The following additional data apply:
Per Unit data:
Overhead cost based on direct labour
Hours per 1,000-unit batch:
Total overhead costs and activity levels for the year are estimated as follows:
Required:
b.Determine the activity cost driver rate for setup costs and inspection costs.
c.Using the ABC system, for the brass style of faucet:
d.Explain the difference between the profits obtained from the traditional system and the ABC system.Which system provides a better estimate of profitability? Why?

Question

Brilliant Accents Company manufactures and sells three styles of kitchen faucets: Brass, Chrome, and White.Production takes 25, 25, and 10 machine hours to manufacture 1,000-unit batches of brass, chrome and white faucets, respectively.The following additional data apply:
  Per Unit data:
  Overhead cost based on direct labour
  Hours per 1,000-unit batch:
  Total overhead costs and activity levels for the year are estimated as follows:
  Required:
  b.Determine the activity cost driver rate for setup costs and inspection costs.
c.Using the ABC system, for the brass style of faucet:
  d.Explain the difference between the profits obtained from the traditional system and the ABC system.Which system provides a better estimate of profitability? Why?

Quizplus · Accepted Answer

The Answer of Brilliant Accents Company manufactures and sells three styles of kitchen faucets: Brass, Chrome, and White.Production takes 25, 25, and 10 machine hours to manufacture 1,000-unit batches of brass, chrome and white faucets, respectively.The following additional data apply:
  Per Unit data:
  Overhead cost based on direct labour
  Hours per 1,000-unit batch:
  Total overhead costs and activity levels for the year are estimated as follows:
  Required:
  b.Determine the activity cost driver rate for setup costs and inspection costs.
c.Using the ABC system, for the brass style of faucet:
  d.Explain the difference between the profits obtained from the traditional system and the ABC system.Which system provides a better estimate of profitability? Why?

Brilliant Accents Company Manufactures and Sells Three Styles of Kitchen