Read the following article: Searching for the True Cost of
Health Care - WSJ-1.pdf
According to the article, M.D. Anderson Cancer Center has implemented a costing system called, a time-driven activity-based costing (TDABC) system.
Please answer the following questions after reading this
article: Time-Driven Activity-Based Costing.pdf
1. What is TDABC? Can you briefly explain the system compared to the traditional ABC system we've learned from the textbook?
2. What do you think is the biggest difficulty companies may feel when they try to adopt the traditional ABC system? How TDABC mitigates the problem?
Homework Answers
Time-driven ABC is used to report the cost of a business on continuous basis by stating the cost allocated to each activity and the time spent on each activity. It is calculated by identifying the unit time of each activity as per capacity, the unit times each activity and then multiplying both to derive the total minutes activity uses; the cost driver rate as calculated in ABC costing, multiplying it with the minutes to identify the cost allocation to each activity.
ABC can be used when there is only a single department, plant or location. If we had to use multiple locations than gathering the data from each location of how much time the employees spent on each activity would require additional manpower.
To overcome this problem, the TDABC uses only two things the cost per time unit of supplying the resource capacity and the time unit consumption of resources by different products, customers, activities.
Add Answer to:
Read the following article: Searching for the True Cost of
Health Care - WSJ-1.pdf
According to...
Exercise 17-1 (Part Level Submission) Saddle Inc. has two types of handbags: standard and custom. The...
Exercise 17-1 (Part Level Submission)
Saddle Inc. has two types of handbags: standard and custom. The
controller has decided to use a plantwide overhead rate based on
direct labor costs. The president has heard of activity-based
costing and wants to see how the results would differ if this
system were used. Two activity cost pools were developed: machining
and machine setup. Presented below is information related to the
company’s operations.
Standard
Custom
Direct labor costs
$51,000
$116,000
Machine hours
1,410...
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Exercise 17-1 (Part Level Submission)
Saddle Inc. has two types of handbags: standard and custom. The
controller has decided to use a plantwide overhead rate based on
direct labor costs. The president has heard of activity-based
costing and wants to see how the results would differ if this
system were used. Two activity cost pools were developed: machining
and machine setup. Presented below is information related to the
company’s operations.
Standard
Custom
Direct labor costs
$51,000
$116,000
Machine hours
1,410...
Problem 7-17 Comparing Traditional and Activity-Based Product Margins [L07-1, LO7-3, LO7-4, LO7-5] Smoky Mountain Corporation makes two types of hiking boots-the Xtreme and the Pathfinder. Data concerning these two product lines appear below: Xtreme Pathfinder $ 91.00 $ 50.00 $ 130.00 $ 64.30 $ 11.20 Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and sales 8.00 1.4 DLHS 1.0 DLHS 21,000 units 72,000 units The company has a traditional...
Hi-Tek Manufacturing, Inc., makes two types of industrial component parts--the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $1,653,900 1,248,762 405,138 580.000 (174.862 Hi-Tek produced and sold 60,100 units of B300 at a price of $19 per unit and 12,800 units of T500 at a price of $40 per unit. The company's traditional...
There is no 1 or 2, only 3-5
Problem 4.34 Product-Costing Accuracy, Corporate Strategy, ABC Autotech Manufacturing is engaged in the production of replacement parts for automobiles. One plant specializes in the production of two parts: Part #127 and Part #234, Part #127 pro- duced the highest volume of activity, and for many years it was the only part produced by the plant. Five years ago, Part #234 was added. Part #234 was more difficult to manufacture and required special...
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