Q2. Bolts and Brackets Limited manufactures and sells two products: arms and brackets. This year for the first time it is operating an activity-based costing system before it followed absorption costing method. The planned production activity cost pools and cost driver activity levels for all the output for the year are as follows: Activity Cost Pool (S) Purchasing materials Storing materials Setting up machinery Running machinery cost $73,000 Activity Level $41,500 1,000 purchase orders $41,600 |650 issue notes $26,400 200 set ups 7,300 machine hours An analysis of actual annual production usage based on activity cost pool for two products types are as follows: Arms Brackets Units produced 1,000 units 190 500 units Purchase orders 325 Stores issue notes Set ups Machine hours Direct materials Direct labor 105 200 35 60 2600 1275 $8250 $3750 $46000 $7600 a) Compute the activity rates. b) Calculate the total production cost and cost per unit for arms and brackets using the activity-based costing system. c) Explain why the company decided to adopt activity-based costing system instead of absorption costing system?
Q2. Bolts and Brackets Limited manufactures and sells two products: arms and brackets. This year for the first time it is operating an activity-based costing system before it followed absorption costing method. The planned production activity cost pools and cost driver activity levels for all the output for the year are as follows: Activity Cost Pool (S) Purchasing materials Storing materials Setting up machinery Running machinery cost $73,000 Activity Level $41,500 1,000 purchase orders $41,600 |650 issue notes $26,400 200 set ups 7,300 machine hours An analysis of actual annual production usage based on activity cost pool for two products types are as follows: Arms Brackets Units produced 1,000 units 190 500 units Purchase orders 325 Stores issue notes Set ups Machine hours Direct materials Direct labor 105 200 35 60 2600 1275 $8250 $3750 $46000 $7600 a) Compute the activity rates. b) Calculate the total production cost and cost per unit for arms and brackets using the activity-based costing system. c) Explain why the company decided to adopt activity-based costing system instead of absorption costing system?
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 4BE: Activity-based costing: selling and administrative expenses Jungle Junior Company manufactures and...
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