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Lim Clothing Company manufactures its own designed and labelled sports attire and sells its products through catalogue sales and retail outlets While Lim has used activity-based costing in its

Lim Clothing Company manufactures its own designed and labelled sports attire and sells its products through catalogue sales and retail outlets. While Lim has used activity-based costing in its manufacturing activities for years, it has always used traditional costing in assigning its selling costs to its product lines. Selling costs have traditionally been assigned to Lim s product lines at a rate of 80% of direct material costs. Its direct material costs for the month of March for Lim s "high-intensity" line of attire are $400,000. The company has decided to extend activity-based costing to its selling costs. Data relating to the high-intensity line of products for the month of March are as follows: Instructions (a) Calculate the selling costs to be assigned to the high-intensity line of attire for the month of March using 1. The traditional product costing system (direct material cost is the cost driver), 2. Activity-based costing. (b) By what amount does the traditional product costing system under-cost or over-cost the high-intensity product line? (c) Classify each of the activities as value-added or non-value-added.

Apr 25 2020 View more View Less

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