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In: Accounting

Calculate the cost of a Regular widget in 2020 using the traditional costing system. Calculate the...

  1. Calculate the cost of a Regular widget in 2020 using the traditional costing system.
  2. Calculate the cost of a Regular widget in 2020 using the ABC system.
  3. Explain why your results differ in questions 7 and 8. Be specific.
  4. What characteristics of Company DEF suggest that changing to an ABC system might benefit it? Which costing system do you recommend Company DEF use? Why
Cost allocation base Indirect in cost
Product desgin number of components 107200
Machine set up hour 401620
Assembly machine hour 594080
Inspection number of product 160460

The accounting department has also compiled the following data by product line for 2020:

Simple Regular Deluxe
number component 4 10 18
set up hour 75 125 300
machine hour 0.75 1.25 2
number of product 1320 2650 7330
DM 6 12 20
DL hour per unit 2 3.5 5
DL cost per hour 12 12 12
unit produced 21040 26200 13335

Company DEF makes three types of widgets: Simple, Regular, and Deluxe. The company currently uses a traditional costing system with one indirect cost pool and machine hours as its allocation base; however, it is considering whether it should implement an activity-based costing (ABC) system in 2020. The accounting department has studied the indirect cost pool and developed the following cost pool data for use in an ABC system in 2020:

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Expert Solution

ekkarill92 answered 1 year ago
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