Contrasting Activity-Based Costing and Conventional Product CostingL04-2, L04-3, L04-4
Rusties Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company’s five activity cost pools:
Required:
1. Compute the activity rate for each of the activity cost pools.
2. The expected activity for the year was distributed among the company’s four products as follows:
Using the ABC data, determine the total amount of
3. Assume that prior to implementing ABC, Rusties used a conventional cost system thatapplied all manufacturing overhead to products based on direct labor-hours. Explain how theconventional overhead cost assignments would differ from the activity-based cost assignments withrespect to Product B.
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Introduction To Managerial Accounting
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