5. (25 pts) The manufacturing division of an electronics company uses activity-b
ID: 2565733 • Letter: 5
Question
5. (25 pts) The manufacturing division of an electronics company uses activity-based costing. The company has identified three activities and the related cost drivers for indirect production costs Activity Activity 1 Activity 2 Activity 3 Cost Driver Direct materials cost Direct labor cost Kilowatt hours Three types of products are produced. Direct costs and cost-driver activity for each product for a month are as follo ws: Product C $125,000 $3,000 2,000 150,000 Product A Product B Direct materials cost $75,000 Direct labor cost Direct labor hours Kilowatt hours $6,000 2,000 150,000 $50,000 $1,000 1,000 200,000 Indirect production costs for the month are as follows: Activity1 $30,000 Activity 2 $20,000 Activity 3 $16000 Total $66,000 A) Compute the indirect production costs allocated to each product using the ABC system. B) Compute the indirect production costs allocated to each product using a traditional costing system. Assume indirect production costs are allocated to each product using the cost driver: direct labor hours.Explanation / Answer
A. Total direct materials cost = 75,000 + 50,000 +125,000 = 250,000
Total direct labour cost = 6,000 + 1,000 + 3,000 = 10,000
Toatl kilowatt hours = 150,000 + 200,000 + 150,000 = 500,000
Activity 1 cost per direct material dollar = 30,000/250,000 = 0.12
Activity 2 cost per direct labour dollar = 20,000/10,000 = 2
Activity 3 cost per kilowatt hour = 16,000/500,000 = 0.032
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B. Predetermined overhaed rate = Estimated overhead costs / Estimated direct labour hours
= 66,000 / 5,000(2,000+1,000+2,000) = 13.2
Applied overhead = Actual direct labour hours * Predetermined overhaed rate
Product A = 2,000 hours * 13.2 per hour = 26,400
Product B = 1,000 hours * 13.2 per hour = 13,200
Product C = 2,000 hours * 13.2 per hour = 26,400.
Product A Product B Product C Activity 1 9,000 (0.12*75,000) 6,000 (0.12*50,000) 15,000 (0.12*125,000) Activity 2 12,000(2*6,000) 2,000 (2*1,000) 6,000 (2*3,000) Activity 3 4,800 (0.032*150,000) 6,400 (0.032*200,000) 4,800 (0.032*150,000) Total 25,800 14,400 25,800Related Questions
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