Greetings, I just started my accounting class and I do not have any accounting e
ID: 2386823 • Letter: G
Question
Greetings,
I just started my accounting class and I do not have any accounting experience of knowledge (my first acct class). Could you please help me out. I will give you all the possible Karma points if you answer my question. I just need the traditional and ABC direct, indirect, and unallocated cost answer for the two accounting systems.
You have been selected to complete the following table by indicating for each activity whether the related cost is direct, indirect, or unallocated. For each indirect cost, indicate one appropriate cost-allocation base (more than one cost allocation base may be appropriate).
Setting up for a production run--related cost is mechanic wages:
Traditional answer: ABC answer:
Purchasing materials and parts to be used in products--related cost is materials and parts cost:
Traditional answer: ABC answer:
Shipping sold products to customers (distributors)--related cost is fuel on company's fleet of trucks:
Traditional answer: ABC answer:
Market research study conducted by marketing staff to assess demand for potential new product--related cost is salaries of market research staff:
Traditional answer: ABC answer:
Production scheduling--related cost is salaries of production scheduling managers:
Traditional answer: ABC answer:
Purchasing materials and parts to be used in products--related cost is salaries of purchasing agents:
Traditional answer: ABC answer:
Order processing of customer orders--related cost is salaries of order staff:
Traditional answer: ABC answer:
Preparing cost analyses--related cost is cost acct salary:
Traditional answer: ABC answer:
Designing a new product--related cost is salaries of design engineers that are fully dedicated to the new product:
Traditional answer: ABC answer:
Managing overall operations--related cost is salary of executive of company:
Traditional answer: ABC answer:
Explanation / Answer
Activity based costing (ABC) assigns manufacturing overhead costs to products in a more logical manner than the traditional approach of simply allocating costs on the basis of machine hours. Activity based costing first assigns costs to the activities that are the real cause of the overhead. It then assigns the cost of those activities only to the products that are actually demanding the activities The allocation of manufacturing overhead (indirect manufacturing costs) to products on the basis of a volume metric such as direct labor hours or production machine hours. As manufacturing becomes more sophisticated the manufacturing overhead costs usually increase while the direct labor hours or production machine hours decrease. Hence, the direct labor or machine hours are unlikely to be the root cause of the manufacturing overhead. Direct, Indirect, and Unallocated Costs Listed below are several activities and related costs that have been observed at Santana Company, a manufacturing company. The company makes a variety of products and currently uses a traditional costing system that allocates only production overhead based on direct-labor hours. It is implementing an ABC system for the design, production, and distribution functions of its value chain. You have been asked to complete the table below by indicating for each activity whether the related cost is direct, indirect, or unallocated. For each indirect cost, indicate one appropriate cost driver (more than one cost driver may be appropriate). The first two items have been completed for you. Activity Related Cost Traditional ABC Supervising production Supervisor salaries Indirect Indirect (direct-labor (people hours) supervised) Designing a prototype Depreciation of Unallocated Indirect (number for new product computers of parts) Setting up for Mechanic wages a production run Purchasing materials Materials and and parts to be used parts cost in products Shipping sold products Fuel used on company’s to customers (distributors) fleet of trucks Market research study Salaries of market conducted by research staff marketing staff to assess demand for potential new product Production scheduling Salaries of production scheduling managers Purchasing materials Salaries of purchasing and parts to be agents used in products Order processing of Salaries of order customer orders processing staff Preparing cost analyses Cost accountant salary Designing a new product Salaries of design engineers that are fully dedicated to this new product Managing overall operations Salary of executive of company Read more: Direct, Indirect, and Unallocated Costs Listed below are several - JustAnswer http://www.justanswer.com/business/3m26l-direct-indirect-unallocated-costs-listed-below-several.html#ixzz1krUB3wiI
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