AT&T; LTE 12:49 PM 81% i × Brilliant Accents Co ABC Problem.pdf Extra Credit Pro

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AT&T; LTE 12:49 PM 81% i × Brilliant Accents Co ABC Problem.pdf Extra Credit Problem: Up to 10 paints toward the Mid-term Esam Brilliant Accents Company manefactures and sells three styles of kitchen faucets: Brass Chrome, and White. Production takes 25, 25, and 10 machine hours to manufacture 1000-umit batches of brass, chrorne and white E.wetsrcspectively. The following additional data apply BRASS CHROME WHITE 0,000 40,000 Projected sales in units Selling price Direct maserials Ohgrhead cost based on direct labor hours 540 520 $30 S 8 SIS 54 S3 S 8 S 9 (traditional sysiem) $12 S 3 59 Direct labor bours Machine hours Setup hours Inspection hours 1.0 30 0.5 20 1.0 20 Total overhead costs and activity levels for the year are estimated as follows Direct laber hours 2400 houE 95 sctup hours 05000 2,700 inspection hours a. Using the traditional system, determing the operating profit per unit for each style of faucet b. Determine the activity-cost-driver rate for setup costs and inspection costs. e. Using the ABC system, for each style of faucet I. computs the estimated overhead costs per unit 2. compute the estimated opcrating profit per unit d. Explain the differences betwecn the profits oblained from the traditional syslem and the ABC system. Which system provides a betler etimale of peofitabliny? Why? Open With Print

Explanation / Answer

a) Operating profit per unit: Brass Chrome White Selling price 40 20 30 Less: Unit costs: DM 8 4 8 DL 15 3 9 Overhead 12 3 9 Total unit costs 35 10 26 Unit Operating profit 5 10 4 b) Activity cost driver rate: Setups 465500 /95 4900 per set up Inspections 405000 /2700 150 per insp. Hr. c) Brass Chrome White 1)EstimatedOverhead per unit (1*4900+30*150)/1000 =$9.40 (0.5*4900+20*150)/1000 =$5.45 (1*4900+20*150)/1000 =$7.90 2)Estimated operating profit per unit Brass Chrome White Selling price 40 20 30 Less: Unit costs: DM 8 4 8 DL 15 3 9 Overhead 9.4 5.45 7.9 Total unit costs 32.4 12.45 24.9 Unit Operating profit 7.6 7.55 5.1 d) The operating profit under the ABC is more refined and critical activity-wise distribution to that of traditional overhead method and acurate operating profit. So, looking at the advantages of ABC is preferred to traditonal method.

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