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 ($310,000) Setups ($610,000) Packing ($162,000) Photo development ($378,000) Cost Driver Number of machine hours Number of setups Number of cartons Number of pictures Moderate Deluxe 50,000 Economy 200,000 150,000 Determine the overhead cost per book for each book type. a. Cost per book (volume-based allocation) b. Cost per book (activity-based costing) De luxe 250 35 20 4,000 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 a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books during the prior year: Deluxe Type of Textbook Moderate 750 10 40 1,000 Moderate 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. Note: For all requirements, round your answers to 2 decimal places. Economy 1,000 5 60 1,000 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 ($310,000) Setups ($610,000) Packing ($162,000) Photo development ($378,000) Cost Driver Number of machine hours Number of setups Number of cartons Number of pictures Moderate Deluxe 50,000 Economy 200,000 150,000 Determine the overhead cost per book for each book type. a. Cost per book (volume-based allocation) b. Cost per book (activity-based costing) De luxe 250 35 20 4,000 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 a. Sheridan currently allocates all overhead costs based on machine hours. The company produced the following number of books during the prior year: Deluxe Type of Textbook Moderate 750 10 40 1,000 Moderate 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. Note: For all requirements, round your answers to 2 decimal places. Economy 1,000 5 60 1,000 Economy
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 ($310,000)
Setups ($610,000)
Packing ($162,000)
Photo development ($378,000)
Cost Driver
Number of machine hours
Number of setups
Number of cartons
Number of pictures
Moderate
150,000
a. Cost per book (volume-based allocation)
b. Cost per book (activity-based costing)
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:
Deluxe
250
35
20
4,000
Deluxe
50,000
Economy
200,000
Determine the overhead cost per book for each book type.
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.
Note: For all requirements, round your answers to 2 decimal places.
Deluxe
Type of Textbook
Moderate
750
10
40
1,000
Moderate
Economy
1,000
5
60
1,000
Economy
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