Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes. Activity (Cost) Machine maintenance ($360,000) Setups ($630,000) Packing ($162,000) Photo development ($504,000) Deluxe 50,000 Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include pictures only in chapter openings. Required Moderate 150,000 Cost Driver Number of machine hours Number of setups Number of cartons. Number of pictures a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books during the prior year: Economy 200,000 Determine the overhead cost per book for each book type. Type of Textbook Deluxe Moderate Economy 300 900 30 1,200 5 50 10 4,000 1,000 (For all requirements, round your answers to 2 decimal places.) a Cost per book (volume-based allocation) b. Cost per book (activity-based costing) 15 30 2,000 b. Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced with an activity-based costing system. Deluxe Moderate Economy
Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes. Activity (Cost) Machine maintenance ($360,000) Setups ($630,000) Packing ($162,000) Photo development ($504,000) Deluxe 50,000 Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include pictures only in chapter openings. Required Moderate 150,000 Cost Driver Number of machine hours Number of setups Number of cartons. Number of pictures a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books during the prior year: Economy 200,000 Determine the overhead cost per book for each book type. Type of Textbook Deluxe Moderate Economy 300 900 30 1,200 5 50 10 4,000 1,000 (For all requirements, round your answers to 2 decimal places.) a Cost per book (volume-based allocation) b. Cost per book (activity-based costing) 15 30 2,000 b. Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced with an activity-based costing system. Deluxe Moderate Economy
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Rahul
Transcribed Image Text:Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three
types of textbooks the company publishes.
Activity (Cost)
Machine maintenance ($360,000)
Setups ($630,000)
Packing ($162,000)
Photo development ($504,000)
Deluxe
50,000
Moderate
150,000
Economy
200,000
Cost Driver
Number of machine hours
Number of setups
Number of cartons
Number of pictures
Deluxe textbooks are made with the finest-quality paper, six-color printing, and many photographs. Moderate texts are made with
three colors and a few photographs spread throughout each chapter. Economy books are printed in black and white and include
pictures only in chapter openings.
Required
a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books
during the prior year:
Determine the overhead cost per book for each book type.
(For all requirements, round your answers to 2 decimal places.)
a.
Cost per book (volume-based allocation)
b. Cost per book (activity-based costing)
Type of Textbook
Moderate
900
15
30
2,000
Deluxe
300
30
10
4,000
Deluxe Moderate Economy
Economy
1,200
b. Determine the overhead cost per book, assuming that the volume-based allocation system described in Requirement a is replaced
with an activity-based costing system.
5
50
1,000
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