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Master Instrument | ||||
Answer a | A | B | C=B/A | |
Activity cost pool | Cost Driver | Cost | Quantity | ABC rates |
Material Handling | Number of requisitions | 35,000.00 | 1,000.00 | 35.00 |
Machine Setups | Number of Setups | 27,000.00 | 500.00 | 54.00 |
Quality Inspections | Number of Inspections | 27,000.00 | 600.00 | 45.00 |
Total Cost assigned | 89,000.00 |
Answer b | See C | D | D=C*D | E | F=C*E | ||
Allocation table | Premium | Standard | |||||
Activity cost pool | Cost Driver | ABC Rates | Activity used | Cost assigned | Activity used | Cost assigned | |
Material Handling | Number of requisitions | 35.00 | 400.00 | 14,000.00 | 600.00 | 21,000.00 | |
Machine Setups | Number of Setups | 54.00 | 200.00 | 10,800.00 | 300.00 | 16,200.00 | |
Quality Inspections | Number of Inspections | 45.00 | 200.00 | 9,000.00 | 400.00 | 18,000.00 | |
Total Cost assigned | 33,800.00 | 55,200.00 | G | ||||
Number of units | 50.00 | 300.00 | H | ||||
Overhead cost per unit | 676.00 | 184.00 | I=G/H |
Answer c |
Benefits: Activity based costing provides a more accurate method of product/service costing, leading to more accurate pricing decisions. It increases understanding of overheads and cost drivers and makes costly and non-value adding activities more visible, allowing managers to reduce or eliminate them. ABC enables effective challenge of operating costs to find better ways of allocating and eliminating overheads. It also enables improved product and customer profitability analysis. |
Answer d |
Cost based pricing: In this a company is price maker. It first calculates its cost then add markup and set the price methodically. |
Market based pricing: In this a company is price taker. It first ascertains what is the maximum price it can get for a product. Then plans for the cost of production accordingly. |
Master Instrument Pty Lad manufactures two products Premium instruments and Standard instruments. During Juary 10 premium...
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