Figure 4-20
Quasi-Tech Corporation produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. Costs have been assigned to each activity using direct tracing and resource drivers:
Owens produces two models: Model X and Model Y. The following table shows how the two products consume activity.

-Refer to Figure 4-20. First, determine the overhead costs assigned to model D using the two most expensive activities for cost pools. The costs of the two relatively inexpensive activities are allocated to the two most expensive activities in proportion to their costs. (Round to two decimal places.)What is the error in the overhead cost assigned to model D using ABC (4 driver model) as the benchmark?
A) $180,030
B) $240,700
C) $313,330
D) $626,650

Question

Figure 4-20
Quasi-Tech Corporation produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. Costs have been assigned to each activity using direct tracing and resource drivers:
  Owens produces two models: Model X and Model Y. The following table shows how the two products consume activity.
 
-Refer to Figure 4-20. First, determine the overhead costs assigned to model D using the two most expensive activities for cost pools. The costs of the two relatively inexpensive activities are allocated to the two most expensive activities in proportion to their costs. (Round to two decimal places.)What is the error in the overhead cost assigned to model D using ABC (4 driver model) as the benchmark?
A) $180,030 
B) $240,700 
C) $313,330 
D) $626,650

Quizplus · Accepted Answer

The error in the overhead cost assigned to model D using ABC (4 driver model) as the benchmark is $180,030. This is because the ABC (4 driver model) assigns more overhead costs to model D than the traditional allocation method. The traditional allocation method assigns $446,620 of overhead costs to model D, while the ABC (4 driver model) assigns $626,650 of overhead costs to model D. The difference between these two amounts is $180,030.

Figure 4-20 Quasi-Tech Corporation Produces Specially Machined Parts. the Parts Are Produced