Question

In: Accounting

MNO uses activity based costing where overhead from three different cost centers are allocated to products...

MNO uses activity based costing where overhead from three different cost centers are allocated to products based upon the following:

Activity                 Driver - Overhead Costs - Product A - Product B

Setup                    Production Runs - $100,000 - 80 productions runs - 20 production runs

Inspection           Inspection Hours - $300,000 - 200 hours - 100 hours

Machining           Machine Hours - $800,000 - 5,000 hours - 3,000 hours

Raw materials are directly followed to each product and the amount of raw materials used for Product A was $300,000 and for Product B was $200,000. Direct labor is directly followed to each product and the amount of direct labor used for product A was $100,000 and for product B was $50,000. There were 12,000 units of product A manufactured and 10,000 units of product B manufactured.

Calculate the total unit cost of making product A and product B using ABC. Show computations.

If MNO uses one plant wide rate to allocate all the overhead based upon direct labor direct labor hours and product A used 20,000 direct labor hours and product B used 10,000 direct labor hours calculate the total unit cost of product A and product B.

Solutions

Expert Solution

a) Calculation of Unit Cost under ABC Costing System:

Working Note 1: Calculation of cost per cost driver

Particulars Cost Driver Total Cost No of Cost Driver Cost per Cost Driver Cost allocated to Product A Cost Allocated to Product B
Setup Cost Production Run 100000 100 1000 80000 20000
Inspection Cost Inspection Hours 300000 300 1000 200000 100000
Machining Cost Machining Hours 800000 8000 100 500000 300000
Total 780000 420000

Calculation of Unit Cost of each Product

Particulars Product A Product B
Direct Material 300000 200000
Direct Labour 100000 50000
Overhead 780000 420000
Total Cost 1180000 670000
No. of Units 12000 10000
Unit Cost 98.33 67

b) Calculation of Unit Cost under One Plant Wide Rate:

Total Overheads= $1200000

Total Labour Hours= 30000

Overhead per Labour Hour= $40

Particulars Product A Product B
Material 300000 200000
Labour 100000 50000
Overhead $40*20000= $800000 $40*10000= $400000
Total Cost 1200000 650000
No of Units 12000 10000
Unit Cost 100 65

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

MNO uses activity based costing where overhead from three different cost centers are allocated to products...
MNO uses activity based costing where overhead from three different cost centers are allocated to products based upon the following: Activity Driver Overhead Costs                                   Product A                                Product B Setup                       Production Runs $100,000 80 productions runs 20 production runs Inspection           Inspection Hours $300,000 200 hours                               100 hours Machining            Machine Hours $800,000 5,000 hours                          3,000 hours Raw materials are directly followed to each product and the amount of raw materials used for Product A was $300,000 and for...
Lysiak Corporation uses an activity based costing system to assign overhead costs to products. In the...
Lysiak Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs--equipment depreciation and supervisory expense-are allocated to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below: Overhead costs: Equipment depreciation $ 47,000 Supervisory expense $ 6,000 Distribution of Resource Consumption Across Activity Cost Pools: Activity Cost Pools Machining Order Filling Other Equipment depreciation 0.60 0.10 0.30 Supervisory expense 0.60 0.20 0.20...
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to...
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below:       Processing $ 5,945 Supervising $ 19,680 Other $ 11,300   Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to...
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to...
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below: Processing $ 5,945 Supervising $ 19,680 Other $ 11,300 Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear...
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to...
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below: Processing $ 5,170 Supervising $ 31,640 Other $ 11,900 Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear...
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to...
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below: Processing $ 4,025 Supervising $ 30,420 Other $ 10,700 Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear...
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to...
Mirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below: Processing $ 6,250 Supervising $ 36,040 Other $ 12,200 Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear...
Mayeux Corporation uses an activity-based costing system with three activity cost pools.
 Mayeux Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity-based costing system: Costs: Wages and salaries   $ 320,000 Depreciation   160,000 Utilities   240,000 Total  $720,000 Distribution of resource consumption: Activity Cost Pools  How much cost, in total, would be allocated in the first-stage allocation to the Setting Up activity cost pool?A) $360,000 B) $336,000 C) $288,000 D) $348,000
ECO Plc Ltd. uses an activity based costing system to assign overhead costs to products. In...
ECO Plc Ltd. uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs - Electricity expense and Water expense - are allocated to three activity cost pools - Grinding, Painting, and Other - based on resource consumption. Data to perform these allocations appear below: Overhead Costs: Electricity expense: $195,000 Water expense: $185,000 Distribution of Resource Consumption across Activity Cost Pools: Overhead Cost Activity Cost Pools Grinding Painting Other Electricity expense 0.40...
Mastery Problem: Activity-Based Costing (Advanced) Activity-Based Costing Traditionally, Overhead cost: Sometimes referred to as "factory overhead,"...
Mastery Problem: Activity-Based Costing (Advanced) Activity-Based Costing Traditionally, Overhead cost: Sometimes referred to as "factory overhead," this is an indirect cost that is not directly tied to the production of units, yet nonetheless must be built into product cost in order to appropriately price it. Examples are managerial salaries, rent expense, setup costs, and property taxes.overhead costs are assigned based arbitrarily on the rate of either Direct labor: This is a labor cost directly associated with the production of goods...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT