Hutchings Company manufactures and distributes two products, A and K. Overhead costs are currently allocated using the number of units produced as the allocation base. The controller has changing to an activity-based costing ABC. system. She has collected the following information:

Required
A. What is the overhead cost per unit under the current system?
B. What is the total overhead allocated to each product using the current system?
C. What would be the total overhead allocated to each product under ABC costing?
D. What would be the overhead cost per unit under ABC costing?
E. Explain how traditional cost systems can lead to inaccurate product information and poor management decisions.

Question

Hutchings Company manufactures and distributes two products, A and K. Overhead costs are currently allocated using the number of units produced as the allocation base. The controller has changing to an activity-based costing ABC. system. She has collected the following information:
  
Required
A. What is the overhead cost per unit under the current system? 
B. What is the total overhead allocated to each product using the current system? 
C. What would be the total overhead allocated to each product under ABC costing? 
D. What would be the overhead cost per unit under ABC costing? 
E. Explain how traditional cost systems can lead to inaccurate product information and poor management decisions.

Quizplus · Accepted Answer

The Answer of Hutchings Company manufactures and distributes two products, A and K. Overhead costs are currently allocated using the number of units produced as the allocation base. The controller has changing to an activity-based costing ABC. system. She has collected the following information:
  
Required
A. What is the overhead cost per unit under the current system? 
B. What is the total overhead allocated to each product using the current system? 
C. What would be the total overhead allocated to each product under ABC costing? 
D. What would be the overhead cost per unit under ABC costing? 
E. Explain how traditional cost systems can lead to inaccurate product information and poor management decisions.

Hutchings Company Manufactures and Distributes Two Products, a and K