Jones Construction currently uses traditional costing where overhead is applied based on direct labor hours. Using traditional costing, the applied overhead rate is $24 per direct labor hour. They are considering a switch to activity-based costing (ABC). The company controller has come up with preliminary overhead rates for each of the following activities:
One of the company's current jobs has the following information available:
Which of the following statements is true when comparing the total overhead allocated to the job using traditional versus ABC costing?
A) ABC costing will yield $362.50 less in overhead cost being allocated to the job.
B) ABC costing will yield $725.50 less in overhead cost being allocated to the job.
C) ABC costing will yield $345.50 more in overhead cost being allocated to the job.
D) ABC costing will yield $725.50 more in overhead cost being allocated to the job.

Question

Jones Construction currently uses traditional costing where overhead is applied based on direct labor hours. Using traditional costing, the applied overhead rate is $24 per direct labor hour. They are considering a switch to activity-based costing (ABC). The company controller has come up with preliminary overhead rates for each of the following activities:
 One of the company's current jobs has the following information available:
 Which of the following statements is true when comparing the total overhead allocated to the job using traditional versus ABC costing?
A) ABC costing will yield $362.50 less in overhead cost being allocated to the job. 
B) ABC costing will yield $725.50 less in overhead cost being allocated to the job. 
C) ABC costing will yield $345.50 more in overhead cost being allocated to the job. 
D) ABC costing will yield $725.50 more in overhead cost being allocated to the job.

Quizplus · Accepted Answer

The Answer of Jones Construction currently uses traditional costing where overhead is applied based on direct labor hours. Using traditional costing, the applied overhead rate is $24 per direct labor hour. They are considering a switch to activity-based costing (ABC). The company controller has come up with preliminary overhead rates for each of the following activities:
 One of the company's current jobs has the following information available:
 Which of the following statements is true when comparing the total overhead allocated to the job using traditional versus ABC costing?
A) ABC costing will yield $362.50 less in overhead cost being allocated to the job. 
B) ABC costing will yield $725.50 less in overhead cost being allocated to the job. 
C) ABC costing will yield $345.50 more in overhead cost being allocated to the job. 
D) ABC costing will yield $725.50 more in overhead cost being allocated to the job.

Jones Construction Currently Uses Traditional Costing Where Overhead Is Applied