ABC corporation applying normal costing system has provided the following data from its activity-based costing system as follows:
Activities |
Estimated Overhead Costs |
Expected Cost Drivers Quantities |
Cost Drivers |
Assembly |
120,500 |
10,000 |
Number of Machine Hours |
Processing Orders |
80,500 |
7,000 |
Number of Orders |
Inspection |
75,500 |
5,000 |
Number of Inspection Hours |
Total |
276,000 |
22,000 |
Actual Data concerning the company's product X appears below:
Required: Compute total costs per unit for the product X using activity-based costing system
Solution: | ||||||
No of unit Produced and Sold | 500 Units | |||||
Assemble activity: | ||||||
Annual Overhead Cost Assembling Activity = Estimated Overhead Cost (Assembling Activity)*Annual Machine hours/Number of Machine hours | ||||||
120500*5000/10000 | ||||||
60250 | ||||||
Cost per unit for Assembling activity = Annual overhead cost /Number of Units produced | ||||||
60250/500 | ||||||
120.5 | ||||||
Cost per unit for Assembling activity = 120.5 | ||||||
Processing order activity: | ||||||
Annual Overhead Cost Processing order activity = Estimated Overhead Cost (Processing order activity) *Annual Number of order/Number of Order | ||||||
80500*4500/7000 | ||||||
51750 | ||||||
Cost per unit of Processing order activity = Annual overhead cost (Processing order Activity)/Number of units produced | ||||||
51750/500 | ||||||
103.5 | ||||||
Cost per unit for Processing order activity = 103.5 | ||||||
Inspection activity: | ||||||
Annual Overhead Cost Inspection activity = Estimated Overhead Cost(Inspection activity) *Annual Number of inspection hours/Number of inspection hours | ||||||
75500*3000/5000 | ||||||
45300 | ||||||
Cost per unit of Inspection activity = Annual overhead cost (Inspection activity)/Number of units produced | ||||||
45300/500 | ||||||
90.6 | ||||||
Cost per unit for Inspection activity = 90.6 | ||||||
Total Cost per unit for Product X : | ||||||
Cost per unit | ||||||
Direct Material | 150 | |||||
Direct Labour | 100 | |||||
Overhead Cost: | ||||||
Assembling activity | 120.5 | |||||
Processing order activity | 103.5 | |||||
Inspection activity | 90.6 | |||||
Cost per unit for Product X | 564.6 | |||||
Total cost per unit for Product X = 564.6 | ||||||
ABC corporation applying normal costing system has provided the following data from its activity-based costing system...
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