Question

Smart Phone Units produced Direct material and direct labor costs Direct labor hours 10,000 $78,000 10,000 Regular Phone Units produced Direct material and labor costs Direct labor hours 100,000 $738,000 90,000 ABC has decided it wants to implement an activity based costing system to cost its products. The following is some data accumulated for the implementation of the ABC system: Activity Cost Cost Driver Ser-ups Material handling Machining Quality testing $120,000 $60,000 $100,000 $80.000 # of production runs # of material moves machine hours direct labor hours Additional data for both phones are as follows: Smart Phone Regular Phone Direct labor hours Machine hours Production runs Material moves 10,000 5.000 20 60 90,000 45,000 10 30 equired Calculate the unit cost for each phone using the activity based costing data -bove

Answer 1

rate positively ..

		i	ii	iii	iv=ii+iii	v=i/iv
			Activity
	Activity	Cost	Smart	Regular	Total	Rate
	Set-ups	120000	20	10	30	4,000.00
	Material handling	60000	60	30	90	666.67
	Machining	100000	5000	45000	50000	2.00
	Quality testing	80000	10000	90000	100000	0.80
	Computation of overhead
		i	ii	iii	iv=i*ii	v=i*iii
					Overhead cost
	Activity	Rate	Smart	Regular	Smart	Regular
	Set-ups	4,000.00	20	10	80,000	40,000
	Material handling	666.67	60	30	40,000	20,000
	Machining	2.00	5000	45000	10,000	90,000
	Quality testing	0.80	10000	90000	8,000	72,000
					138,000	222,000
	Computation of unit cost
			Smart	Regular
i	Direct material & labor	78000	738000
ii	Overhead		138,000	222,000
iii=i+ii	Total cost		216000	960000
iv	Unit produced		10000	100000
v=iii/iv	Per unit cost		21.60	9.60