Particulars Product A Product B Product C
a. Product cost per unit under single
plant wise overhead method (given) $ 59.30 $ 85.50 $ 61.40
b. Product cost per unit under Activity
Based Costing Method (As above) $ 77.60 $ 134.50 $ 47.35
CONCLUSION: It has been observed that the product cost for Product A and B is lower under Single overhead rate method and is higher for Product C. Activity Based Costing (ABC) Method shows an accurate allocation of overhead cost based on the cost driver assigned to each overhead. Therefore, the cost of Product A and B should be increased by $18.30 ($ 77.60 - $ 59.30) and $ 49 ($ 134.50 - $ 85.50). Similarly, the cost of product C should be decreased by $14.05 ($ 47.35 - $ 61.40).
Therefore, the management should implement Activity Based Costing (ABC) Method for better allocation of Factory Overhead Costs.
Sky Plasties: Activity-Based Costing System Case Study Mr. Sami Sultan, Chairman of Sky Plastics, was studying...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for Its five activity cost pools: Activity Measure Expected Overhead Expected Activity DLHS Activity Cost Pool Cost 135,600 24 Labor-related Direct labor-hours 22,600 $ 8,400 $ 68,870 240...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Labor-related Purchase orders Parts management Board etching General factory Activity Measure Direct labor-hours Number of orders Number of part types Number of boards Machine-hours Expected Overhead Cost $ 231,600 $ 15,015 $ 95,200 $ 106,800 $ 184,500 Expected Activity 38,600 DLHS 231 orders 112 part types 1,780 boards...
Thank you Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Labor related Purchase orders Parts management Board etching General factory Activity Measure Direct labor-hours Number of orders Number of part types Number of boards Machine-hours Expected Overhead Cost $ 184,800 $ 6,909 $ 81,120 $ 45,000 $ 150, 300 Expected Activity 30,800 DLHS 230 orders 194...
Sultan Company uses an activity based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: 3 Activity Cost Pool Labor-related Purchase orders Parts management Board etching General factory Activity Measure Direct labor-hours Number of orders Number of part types Number of boards Machine-hours Expected Overhead Cost $ 269,100 $ 11,000 $ 78,440 $ 85,950 $ 242,400 Expected Activity 29,900 DLHS 220 orders 106 part types...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: 8 01:59:26 Activity Cost Pool Labor-related Purchase orders Parts management Board etching General factory Activity Measure Direct labor-hours Number of orders Number of part types Number of boards Machine-hours Expected Overhead Cost $ 241,500 $ 6,060 $ 90,300 $ 69,600 $ 193,000 Expected Activity 34,500 DLHS 202 orders 105 part types...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Activity Measure Expected Overhead Cost Expected Activity Labor-related Direct labor-hours $ 241,500 34,500 DLHs Purchase orders Number of orders $ 6,060 202 orders Parts management Number of part types $ 90,300 105 part types Board etching Number of boards $ 69,600 1,740 boards General factory Machine-hours $ 193,000...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Labor-related Purchase orders Parts management Board etching General factory Activity Measure Direct labor-hours Number of orders Number of part types Number of boards Machine-hours Expected Overhead Cost $ 156,000 $ 11,000 $ 80,000 $ 90,000 $ 180,000 Expected Activity 26,000 DLHS 220 orders 100 part types 2,000 boards...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Labor-related Purchase orders Parts management Board etching General factory Activity Measure Direct labor-hours Number of orders Number of part types Number of boards Machine-hours Expected Overhead Cost $ 284.000 $ 6,790 $ 71,340 $ 57,900 $ 229,900 Expected Activity 35,500 DLHS 194 orders 82 part types 1.930 boards...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Labor-related Purchase orders Parts management Board etching Ceneral factory Activity Measure Direct labor-hours Number of orders Number of part types Number of boards Machine-hours Expected Overhead Cost $ 269,100 $ 11,000 $78,440 $ 85,050 $ 242,400 Expected Activity 29,900 DLHS 220 orders 106 part types 1,890 boards 20,...
Sultan Company uses an activity-based costing system. At the beginning of the year, the company made the following estimates of cost and activity for its five activity cost pools: Activity Cost Pool Activity Measure Expected Overhead Cost Expected Activity Labor-related Direct labor-hours $ 174,000 34,800 DLHs Purchase orders Number of orders $ 7,200 240 orders Parts management Number of part types $ 66,500 95 part types Board etching Number of boards $ 64,800 1,620 boards General factory Machine-hours $ 115,200...