1.
Introduction:
To compute: The activity rate for each activity cost pool.
1.
Answer to Problem 4A.1E
Total ABC cost of Hubs is $490,000 and Total ABC cost of sprockets $598,000.
Explanation of Solution
The overhead assigned between two products:
Hubs:
Activity cost Pool | Activity rate(A) $ | Expected activity (B) $ | ABC cost ( |
Machine setups | 180 per setup | 100 setups | 18000 |
Special processing | 40 per M hour | 5000 machine hour | 200000 |
General factory | 34 per L hour | 8000 labor hours | 272000 |
Total ABC cost | 490000 |
Sprockets:
Activity cost Pool | Activity rate(A) $ | Expected activity (B) $ | ABC cost ( |
Machine setups | 180 per setup | 200 setups | 54,000 |
Special processing | 40 per M hour | 0 machine hour | 0 |
General factory | 34 per L hour | 16000 labor hours | 544,000 |
Total ABC cost | 598,000 |
Working notes:
Activity cost Pool | Estimated overhead (A) | Expected activity (B) | Activity rate( |
Machine setups | $72000 | 400 setups | 180 per setup |
Special processing | 200000 | 5000 machine hours | 40 per machine hour |
General factory | 816000 | 24000 labor | 34 per labor hour |
Thus, Total ABC cost of Hubs is $490,000 and Total ABC cost of sprockets $598,000.
2.
Introduction: Job costing is a technique of determine the cost of a manufacturing job rather than the process of the job. Manufacturing overhead is applied to product or job order is determined as predetermined overhead. Absorption costing is used to calculate the cost of product while taking indirect and direct expense into account. Activity based costing assign the cost of all the activity of the organization according to their actual consumption
To compute: the unit product cost for Hubs and sprockets using activity based absorption costing.
2.
Answer to Problem 4A.1E
Unit product cost of hubs is $93 and a sprocket is $38.95.
Explanation of Solution
Particular | Hubs $ | Sprockets |
Direct materials | 32 | 18 |
Direct labor | 12( | 6( |
Manufacturing overhead | 49 ( | 14.95 ( |
Unit product | $93 | $38.95 |
Thus, unit product cost of hubs is $93 and sprockets are $38.95.
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