Using the information provided compute the activity rates for the original 49.29 29.33 25.79 65.45 Description Complete this Mastery Test Instructions Comparing Traditional Costing and Activity Based Costing Double Bounce Trampolines produces two models of trampolines for backyard fun. The “Original”, and the recently introduced “Deluxe”. The Deluxe model introduced several safety features that were intended to scare overly protective parents into upgrading. Since its introduction, the deluxe model has been increasing in sales, but at the same time, the company’s profits have been declining. The CFO believes that the company’s traditional costing system may be to blame. Currently, the company uses direct-labor hours as the basis for applying overhead. The company estimates that it will incur $811,250 in overhead costs in the next year. The following cost data is known: Original Deluxe Direct Materials $55 $85 Direct Labour ($10 per hour) 25 35 Number of units produced 7,000 units 2,000 units The CFO wishes to explore an activity-based costing system Activity (Cost Driver) Estimated MOH Expected Activity Total Standard Deluxe Assembly (Labor Hours) $151,250 21,600 15,000 6,600 Receiving (Receiving Reports) 300,000 6,000 3,000 3,000 Testing (Number of Tests) 360,000 1,200 300 900 $811,250
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.
QUESTION 3
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Using the information provided compute the activity rates for the original
49.29
29.33
25.79
65.45
Description Complete this Mastery Test
Instructions Comparing Traditional Costing and Activity Based Costing
Double Bounce Trampolines produces two models of trampolines for backyard fun. The “Original”, and the recently introduced “Deluxe”. The Deluxe model introduced several safety features that were intended to scare overly protective parents into upgrading. Since its introduction, the deluxe model has been increasing in sales, but at the same time, the company’s profits have been declining. The CFO believes that the company’s traditional costing system may be to blame. Currently, the company uses direct-labor hours as the basis for applying overhead. The company estimates that it will incur $811,250 in overhead costs in the next year.
The following cost data is known:
Original
Deluxe
Direct Materials
$55
$85
Direct Labour ($10 per hour)
25
35
Number of units produced
7,000 units
2,000 units
The CFO wishes to explore an activity-based costing system
Activity (Cost Driver)
Estimated MOH
Expected Activity
Total
Standard
Deluxe
Assembly (Labor Hours)
$151,250
21,600
15,000
6,600
Receiving (Receiving Reports)
300,000
6,000
3,000
3,000
Testing (Number of Tests)
360,000
1,200
300
900
$811,250
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