Question

Please write the formula for your answer!

7. Ryan Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Assembly.................... Processing orders ....... Inspection ................... Total Cost $698,950 $85,101 $107.440 Total Activity 35,000 machine-hours 1,900 orders 1.580 inspection-hours Data concerning the company's product P58Z appear below: Annual unit production and sales...... 400 Annual machine-hours..... 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

Cost Pool	Cost	Activity	Rate	consumed	Applied
Assembly	698950	35000	19.97	1000	19970
Processing Orders	85101	1900	44.79	90	4031.1
Inspection	107440	1580	68	30	2040
				Total overhead applied	26041.1
Calculation of unit product cost
Direct material	34.78
Direct labor	23.52
Overheads	65.10275
Unit cost	123.40275

A 1 Cost Pool 2 Assembly 3 Processing Orders 4 Inspection в Cost 698950 85101 107440 с р Activity Rate consumed Applied 35000 =B2/C2 1000 =D2*E2 1900 =B3/C3 90 =D3*E3 1580 =B4/C4 30 =D4*E4 Total overhead aqpplied =SUM(F2:F4) 5 7 Calculation of unit product cost 8 Direct material 9 Direct labor 10 Overheads 11 Unit cost 34.78 23.52 =F5/400 =SUM(B8:B10)

8. Total machine hours = 50,000/8 = 6,250

Rate under traditional costing = 53000/6250 = $8.48 per hour

Overheads under traditional costing = 15*8.48 = $127.2

Under ABC = 8*15 + 40*2 = $200

Hence, under costed under traditional by $72.8