Question
In: Accounting
Juguette has decided to implement ABC. Expected product-costing data are given below: Robots Race Cars Total...
Juguette has decided to implement ABC. Expected product-costing data are given below:
|
Robots |
Race Cars |
Total |
|
|
Units produced |
50,000 |
250,000 |
|
|
Prime costs |
$200,000 |
$750,000 |
$950,000 |
|
Machine hours |
20,000 |
10,000 |
30,000 |
|
Number of setups |
25 |
75 |
100 |
|
Number of moves |
140 |
210 |
350 |
|
Inspection hours |
1,200 |
2,800 |
4,000 |
|
Overhead costs: |
|
|
Machining |
$150,000 |
|
Setting up |
80,000 |
|
Moving materials |
70,000 |
|
Inspecting products |
50,000 |
- Calculate the four activity rates:
Machining:
Setting up:
Moving materials:
Inspecting products:
- Calculate the unit costs using activity rates.
Solutions
Expert Solution
Under activity rates method, the cost are allocated on the basis of each activity by first calculating the activity rate and then multiplying the rate with the activity of the respective product.
Computation of overheads using activity rates will be:
1. Machining rate= Total Machining Overhead Costs/Total Machine hours
Therefore, Machining rate = $150,000/30,000 hours = $5 per hour
2. Setting up rate= Total Setting Up Costs/Total no of set ups
Therefore, Setting up rate = $80,000/100 set ups = $800 per Setup
3. Moving Material rate= Total Moving Material Costs/Total no of moves
Therefore, Moving Material rate = $70,000/350 Moves = $200 per moves
4. Inspecting rate= Total Inspecting Costs/Total Inspection Hours
Therefore, Inspecting rate = $50,000/4,000 Hours = $12.5 per inspection hours
Computation of unit costs using activity rates:
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