Activity Base Costing (ABC) Mango Mancam has two produce lines for it well marketed Milk Shake...

Activity Base Costing (ABC)

Mango Mancam has two produce lines for it well marketed Milk Shake drink: Regular and Deluxe size. The company assigns $340,000.00 in manufacturing overhead costs to three departments; Purchasing, Mixing and Packing.

Additional information about each product line is shown below;

	Regular	Deluxe
Number of units Produced per month	220,000	150,000
Number of Units Sold per month	210,000	140,000
Direct Material cost per unit	1.10	1.15
Machine hour per Unit	0.50	0.40
Direct Labor Cost per hour	.40	.30
Direct Labor hours per unit	0.15	0.30

The following cost pool and cost driver was used

Cost Pool	Amount Allocated	Cost Driver	Total Drive Volume
Purchasing Department	120,000	Purchase Order	30,000
Mixing Department	180,000	Machine hours	170,000MH
Packing Department	40,000	Direct Labor hours	4,000 DLH
Total Allocation	340,000

The amount of driver activity corresponding to each product line is as follow

(a) Allocate manufacturing overhead costs to each product line using machine hours as a single cost driver.

(b) Allocate manufacturing overhead costs to each product line using the ABC approach.

(d) As a manager advice the CEO of the company what is the most cost effective method for the company. Give some key example. (Hint: keep your answer short, sweet and simple)

Solutions

Expert Solution

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Assume a company that uses activity-based costing (ABC) has only two products – A and B....

Assume a company that uses activity-based costing (ABC) has only two products – A and B. The company does not have any organization-sustaining activities or unused capacity costs. The company’s total manufacturing overhead cost of $56,000 has been allocated to the three activities shown below: Setups Machining Packing Orders Activity measure quantity: Product A 20 1,000 150 Activity measure quantity: Product B 20 ? 350 Overhead cost per activity cost pool ? ? $ 10,000 Activity rate $ 150 per...

Explain the purpose of Activity-Based Costing(ABC).

- Activity-Based Costing Define activity-based costing (ABC) systems. What benefits does implementing an ABC system bring...

- Activity-Based Costing Define activity-based costing (ABC) systems. What benefits does implementing an ABC system bring to the company? Explain at least two benefits. What are the disadvantages to implementing an ABC system? List and explain at least two. Would the proposed changes make ABC a universally applicable costing method in your opinion? Why or why not? Elaborate your response. No plagiarised answer, please.

What is the difference between Activity-Based Costing(ABC) and Traditional Costing?

As you might imagine the ABC Tank Manufacturing Company uses an activity-based costing system. ABC has...

As you might imagine the ABC Tank Manufacturing Company uses an activity-based costing system. ABC has given you the following data that is used in its activity-based costing system: Overhead Costs Wages and salaries $ 348,000 Other overhead costs 193,000 Total overhead costs $ 541,000 Activity Cost Pool Activity Measure Total Activity Direct labor support Number of direct labor-hours 10,500 DLHs Order processing Number of orders 480 orders Customer support Number of customers 105 customers Other This is an organization-sustaining...

Family Supermarkets (FS) decides to apply ABC analysis to three product lines: baked goods, milk and...

Family Supermarkets (FS) decides to apply ABC analysis to three product lines: baked goods, milk and fruit juice, and frozen foods. It identifies four activities and their activity cost rates as: Ordering R100 per purchase order Delivery and receipt of merchandise R80 per delivery Shelf-stocking R20 per hour Customer support and assistance 20 cents per item sold The revenues, cost of sales, store support costs, and activity-area usage of the three product lines are: Baked goods Milk and fruit juice...

The Brital Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The...

The Brital Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The following information was collected for the month of June: Direct Materials processed: 28,000 gallons Production: Butter Cream 12,500 gallons Condensed Milk 15,500 gallons Sales: Butter Cream 12,000 gallons Condensed Milk 15,000 gallons Sales: Butter Cream $2.5 per gallon Condensed Milk $5.5 per gallon The costs of purchasing the of unprocessed milk and processing it up to the splitoff point to yield a total of...

The Kenton Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The...

The Kenton Company processes unprocessed milk to produce two products, Butter Cream and Condensed Milk. The following information was collected for the month of June: Direct Materials processed: 27,500 gallons (after shrinkage) Production: Butter Cream 12,500 gallons Condensed Milk 15,000 gallons Sales: Butter Cream 12,000 gallons Condensed Milk 14,500 gallons Sales Price: Butter Cream $4.50 per gallon Condensed Milk $8.00 per gallon Separable costs in total: Butter Cream $13,000 Condensed Milk $35,600 The cost of purchasing the of unprocessed milk...

ABC Corporation has three service departments with the following costs and activity base: Service Department Cost...

ABC Corporation has three service departments with the following costs and activity base: Service Department Cost Activity Base for Allocation Graphics Production $200,000 # of copies Accounting $500,000 # of invoices processed Personnel Department $400,000 # of employees ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and activity information for December 31, 2017 are as follows: Micro Macro Super Direct Revenues $700,000 $850,000 $650,000 Direct Operating Expenses $50,000 $70,000 $100,000 # of copies made 20,000 30,000...

Q1. Activity-based costing (ABC) is a costing methodology that identifies activities in an organization and assigns...

Q1. Activity-based costing (ABC) is a costing methodology that identifies activities in an organization and assigns the cost of each activity with resources to all products and services according to the actual consumption by each. Do you think Activity-Based Costing (ABC) has any advantages if so discuss few advantages and also the challenges of this system and how we can resolve it?

Subjects