Homework Answers
Solution:
Calculation of Rate per Cost Driver as per Activity Based Costing
|
Activity |
Cost $ |
Cost Driver |
Number of Cost Drivers (Budget + Deluxe) |
Rate Per Cost Driver = Cost $ / Number of Cost Drivers |
|
Ordering and Receiving |
1,10,000.00 |
Number of Orders |
1,000 Orders |
110.00 per order |
|
Machine Setup |
2,97,000.00 |
Number of Setups |
900 Setups |
330.00 per setup |
|
Machining |
10,00,000.00 |
Number of Machine Hours |
2,50,000 Machine Hours |
4.00 per machine hour |
|
Assembly |
12,00,000.00 |
Number of Parts |
20,00,000 Parts |
0.60 per part |
|
Inspection |
3,00,000.00 |
Number of Inspections |
1,000 Inspections |
300.00 per inspection |
|
29,07,000.00 |
Calculation of Overheads allocated to the Budget Model as per Activity Based Costing
|
Budget |
|||
|
Costs |
Cost Driver |
Overhead Rate $ |
Cost Assigned $ |
|
Ordering and Receiving |
600 |
110.00 |
66,000.00 |
|
Machine Setup |
500 |
330.00 |
1,65,000.00 |
|
Machining |
1,50,000 |
4.00 |
6,00,000.00 |
|
Assembly |
12,00,000 |
0.60 |
7,20,000.00 |
|
Inspection |
550 |
300.00 |
1,65,000.00 |
|
Total Overhead Cost $ |
17,16,000.00 |
||
|
Number of Units |
7,00,000 |
||
|
Overhead Cost per Unit $ |
2.45 |
||
Therefore, Cost per unit for the Budget Model is $2.45 per unit.
Calculation of Overheads allocated to the Deluxe Model as per Activity Based Costing
|
Deluxe |
|||
|
Costs |
Cost Driver |
Overhead Rate $ |
Cost Assigned $ |
|
Ordering and Receiving |
400 |
110.00 |
44,000.00 |
|
Machine Setup |
400 |
330.00 |
1,32,000.00 |
|
Machining |
1,00,000 |
4.00 |
4,00,000.00 |
|
Assembly |
8,00,000 |
0.60 |
4,80,000.00 |
|
Inspection |
450 |
300.00 |
1,35,000.00 |
|
Total Overhead Cost $ |
11,91,000.00 |
||
|
Number of Units |
2,00,000 |
||
|
Overhead Cost per Unit $ |
5.96 |
||
Therefore, Cost per unit for the Deluxe Model is $5.96 per unit.
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