Question

7. Ryan Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Total Cost Total Activity Assembly..... $698,950 35,000 machine-hours Processing orders ....... $85,101 1,900 orders Inspection ......... $107,440 1,580 inspection-hours Data concerning the company's product P58Z appear below: Annual unit production and sales...... 400 Annual machine-hours...... 1,000 Annual number of orders. 90 Annual inspection hours.......... 30 Direct materials cost ........ $34.78 per unit Direct labor cost... $23.52 per unit According to the activity-based costing system, the unit product cost of product P58Z is closest to: 8. Priya Corporation manufactures a variety of products. In the past, Priya had been using a traditional overhead allocation system based on machine hours. For the current year, Priya decided to switch to an activity-based costing system using machine hours and the number of inspections as measures of activity. Information on these measures of activity and related overhead rates for the current year is as follows: Machine hours... Number of inspections.... Estimated Activity 50,000 3,000 Predetermined Overhead Rate $8 per machine hour $40 per inspection Job #812 for the current year required 15 machine hours and 2 inspections. Would this job have been over-costed or under-costed under the traditional system and by how much?

Answer 1

8 Answer) Over head cost under tarditional method 7 Answer) Activity cost pool Assembly Processing order cost Inspection total activity Total Cost Per unit cost 35000 698950 $ 19.97 per machine hour 1900 85101 $ 44.79 per order 1580 107440 $ 68.00 per mchine insp.hour total cost as per ABC system = 50000*8 + 3000*40 Total cost = 520000 total cost would be same as per both abc and traditional method Product P58Z Particulars Direct material cost Direct Labour cost Annual m/c hrs. Annual no.of orders Annual insp.hrs Traditional mathod total cost = $ 520000 machine hours would be = 50000 hrs Over head cost per =520000/50000 = 10.4 per machine hour Basis 400 units 400 units 1000hrs 90orders 30 hrs. Working Cost 400*38.78 $ 15,512.00 400*23.52 $ 9,408.00 19.97*1000 $ 19,970.00 44.79*90 $ 4,031.10 68*30 $ 2,040.00 Where as job 812 over head cost as follows working cost $50,961.10 Total Cost As per Activity based costing system Particulars basis under ABC: Machine hours 15 hrs inspections 2 insp. total cost under ABC 15* 8 120 80 200 $ Under traditional method Machine hours 15 hrs 15*10.4 $ 156 Conclusion : this job is under cost by $ 44 in tradtional method than under ABC system Sheet1 Sheet2 Sheet3 Sheet4 05:24 Type here to search o B T = 2 + 3 x 9 @ J- @_^GO 1) ENG 06-02-2 x