Howard company makes two products A & B. Here is some financial information abou
ID: 2335927 • Letter: H
Question
Howard company makes two products A & B. Here is some financial information about those products.
A
B
Combined total cost of cost drivers
Direct labor
$25,000
$15,000
Direct materials
$40,000
$30,000
Cost drivers
Set ups
7
3
$10,000
Inspections
4
6
$5,000
Test Runs
15
5
$25,000
Units produced
1000
1000
Required:
1. Compute the total of product A using ABC costing.
2. Compute the total cost per unit of product A using ABC costing.
3. Compute the total cost of product B using ABC costing.
4. Compute the total cost per unit cost of product B using ABC costing.
5. If Howard company stopped using activity based costing and instead computed overhead at the rate of $1 per labor dollar, what would be the total cost and the unit cost of product A?
6. If Howard company stopped using activity based costing and instead computed overhead at the rate of $1 per labor dollar, what would be the total cost and the unit cost of product B?
A
B
Combined total cost of cost drivers
Direct labor
$25,000
$15,000
Direct materials
$40,000
$30,000
Cost drivers
Set ups
7
3
$10,000
Inspections
4
6
$5,000
Test Runs
15
5
$25,000
Units produced
1000
1000
Required:
1. Compute the total of product A using ABC costing.
2. Compute the total cost per unit of product A using ABC costing.
3. Compute the total cost of product B using ABC costing.
4. Compute the total cost per unit cost of product B using ABC costing.
5. If Howard company stopped using activity based costing and instead computed overhead at the rate of $1 per labor dollar, what would be the total cost and the unit cost of product A?
6. If Howard company stopped using activity based costing and instead computed overhead at the rate of $1 per labor dollar, what would be the total cost and the unit cost of product B?
Explanation / Answer
1) Total of Product A using ABC : Particulars Amount Direct labor 25000 Direct materials 40000 Overhead : Set up (10000/10*7) 7000 Inspections(5000/10*4) 2000 Test runs(25000/20*15) 18750 92750 2) Per unit of cost of A 92750/1000 92.75 3) Total of Product A using ABC : Particulars Amount Direct labor 15000 Direct materials 30000 Overhead : Set up (10000/10*3) 3000 Inspections(5000/10*6) 3000 Test runs(25000/20*5) 6250 57250 4) Per unit of cost of A 57250/1000 57.25 5) If howard company stops ABC and compute OH at the rate of $1 per labour dollar For product A Particulars Amount Direct labor 25000 Direct materials 40000 Overhead : $1 * 25000 labour dollar 25000 Total cost 90000 Per unit cost 90 6) If howard company stops ABC and compute OH at the rate of $1 per labour dollar For product B Direct labor 15000 Direct materials 30000 Overhead : $1 * 15000. 15000 Total cost 60000 Per unit cost 60
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