Question

Alrex company is using an activity-based costing (ABC) system. The company produces and sells two products: Basic and Pro. The company consists of two departments: Production (where all manufacturing activities are taken) and Marketing (which engages in selling and admin activity only). The ABC system includes in unit product costs all costs easily associated with units. In addition, in the ABC system, there are four major indirect activities: Machine Setups, Special Processing, Factory Supervision, and Customer Relation The prices, direct material cost (DM), shipping cost and direct labor-hours (DLHs) are given below for one unit of the product, as well as the total units produced and sold. DLHs Shipping Cost Product Basic Pro Price $180 $320 DM $50 $80 Hourly Wage-DL $10 $12 $2 Units 6,000 4,000 2 $4 The company collected the data for ABC as follows: Activity Cost Pool Activity Measure Estimated OH cost Activity measures used Basic Pro 60 120 6,000 10,000 Machine Setup Special Processing Factory Supervision Customer Relation (10 customers) # of setups Machine hours DLH # of customers $ $ $ $ 472,500 360,000 224,000 240,000 Under the ABC system, what is the unit product cost for Basic? (Choose the closest amount.)

Answer 1

Basis for seg gye gation of Overheads Basis - cost per basis cast pool Machine Setup 4+2500 set ups (60+20) $472500 180 - $2625 per set up. $ 360000 16000 360000 special processing Machine hours (6000+ 10000) = $22.5 per machine hour Supervision 224000 DLH ( 6000x1 + [ 4000x2) Basic pro $.224000 14000 $loper

Customer relation 10 240000 $ 240000 2 24000 No seggregation data like - how many customers to basic M to PRO- So, we can assume as - Equal customers to basic apro. (say 5/10 taon) ON Alternate assumption on the basis of units ie; 6 customers to Basic 4 cassomers to Pro- a cose, the answer would change. cu such in computation unit of of cast Basic: per customers Cassumption) On the basis of unib (customers) Cassumption) 300000 60000 12000 300000 • 60000 12000 Direct material (6000, 50) DLH ( 60000-X 261x$0) Shipping cost (6000x2) overheads Set up (machine) (60 x 2625) processing ( 6000 X 22.5) Supervision (600x1) x16 157500 135000 96000 15 7500 135000 96000.

customer relasjon – 5x 24000 - 6 x 24000 120000 144000 Total 880500 904500 Units 6000 6000 Cost fer unit 100). $146:35 $150.75