Hi Tech Products manufactures three (3) types of CD players: Cheap, Econo and Deluxe. Hi Tech uses an activity-based product costing system. The company has identified five (5) activities. Each activity, its cost and related activity driver are identified below: Activity Material handling Material insertion Automated machinery Finishing Packaging Total manufacturing cost Activity Cost $225 000 $2 475 000 $840 000 $170 000 $170 000 $3 880 000 Activity Driver Number of parts Number of parts Machine hours Labour hours Orders shipped The following information pertains to each product line of CD players: Units to be produced Orders to be shipped Number of parts per unit Machine hours per unit Labour hours per unit Cheap 10 000 1000 10 1 Econo Deluxe 5000 2000 500 200 15 25 3 5 2 Under an activity-based product costing system, what is the cost per unit of Cheap?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Hi Tech Products manufactures three (3) types of CD players: Cheap, Econo and Deluxe. Hi Tech uses an activity-based product costing system. The company has identified five (5) activities. Each activity, its cost and related activity driver are identified below:
Activity
Material handling Material insertion Automated machinery Finishing
Packaging
Total
Activity Cost
$225 000 $2 475 000 $840 000 $170 000 $170 000 $3 880 000
Activity Driver
Number of parts Number of parts Machine hours Labour hours Orders shipped
The following information pertains to each product line of CD players:
Units to be produced Orders to be shipped Number of parts per unit Machine hours per unit Labour hours per unit
Cheap
10 000 1000 10
1
Econo Deluxe
5000 2000 500 200 15 25
3 5
2
Under an activity-based product costing system, what is the cost per unit of Cheap?
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