Question Memory Disk Inc. is considering a change to activity-basedproduct costing. The company produces two products, CDs and DVDs,in a single production department. The production department isestimated to require 4,000 direct labor hours. The total indirectlabor is budgeted to be $547,200. Time records from indirect labor employees revealed that theyspent 40% of their time setting up production runs and 60% of theirtime supporting actual production. The following information about CDs and DVDs was determined fromthe corporate records: Number of Setups DirectLabor Hours Units CDs 500 2,000 76,000 DVDs 1,100 2,000 76,000 Total 1,600 4,000 152,000 If required, round your answers to the nearest cent. a. Determine the indirect labor cost per unitallocated to CDs and DVDs under a single plantwide factory overheadrate system using the direct labor hours as the allocationbase. CDs $ per unit DVDs $ per unit b. Determine the budgeted activity costs andactivity rates for the indirect labor under activity-based costing.Assume two activities—one for setup and the other for productionsupport. Budgeted ActivityCost Activity Rate Setup $ $ per setup Production support $ $ per direct labor hour c. Determine the activity cost per unit forindirect labor allocated to each product under activity-basedcosting. CDs $ per unit DVDs $ per unit
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
Memory Disk Inc. is considering a change to activity-basedproduct costing. The company produces two products, CDs and DVDs,in a single production department. The production department isestimated to require 4,000 direct labor hours. The total indirectlabor is budgeted to be $547,200.
Time records from indirect labor employees revealed that theyspent 40% of their time setting up production runs and 60% of theirtime supporting actual production.
The following information about CDs and DVDs was determined fromthe corporate records:
|
|
Number of Setups |
DirectLabor Hours |
Units |
|||||||
|
CDs |
|
500 |
|
|
2,000 |
|
|
76,000 |
|
|
|
DVDs |
|
1,100 |
|
|
2,000 |
|
|
76,000 |
|
|
|
|
Total |
|
1,600 |
|
|
4,000 |
|
|
152,000 |
|
If required, round your answers to the nearest cent.
a. Determine the indirect labor cost per unitallocated to CDs and DVDs under a single plantwide factory overheadrate system using the direct labor hours as the allocationbase.
|
CDs |
$ per unit |
|
DVDs |
$ per unit |
b. Determine the budgeted activity costs andactivity rates for the indirect labor under activity-based costing.Assume two activities—one for setup and the other for productionsupport.
|
|
Budgeted ActivityCost |
Activity Rate |
|
|
Setup |
$ |
$ |
per setup |
|
Production support |
$ |
$ |
per direct labor hour |
c. Determine the activity cost per unit forindirect labor allocated to each product under activity-basedcosting.
|
CDs |
$ per unit |
|
DVDs |
$ per unit |
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