Question
In: Accounting
Delicioso Ltd manufactures two types of Microwave Ovens – Conventional and Integrated. The company is currently...
Delicioso Ltd manufactures two types of Microwave Ovens – Conventional and Integrated. The company is currently using a traditional costing system with machine hours as the cost driver. The company is considering whether to use the activity-based costing (ABC) method to allocate overhead costs to products. Budgeted overhead costs of the upcoming accounting period follow:
|
Activity |
Total budgeted activity cost |
Activity driver |
|
Machining |
$300,000 |
Number of machine hours |
|
Setup |
$100,000 |
Number of production runs |
|
Inspection |
$105,000 |
Number of inspection hours |
The activity level for the year is: Conventional Integrated
Annual production in units 50,000 100,000
Direct material cost $150,000 $300,000
Direct labour costs $50,000 $100,000
Direct labour hours 2,500 5,000
Machine hours 25,000 50,000
Number of production runs 50 50
Inspection hours 1,000 500
1. Calculate the unit cost of each product if the conventional costing approach is used
2. determine the unit of producing each product if activity based costing is used .
Solutions
ekkarill92 answered 2 years agoRelated Solutions
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A technician compares repair costs for two types of microwave ovens (type I and type II)....
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ovens (type I and type II). He believes that the repair cost for
type I ovens is greater than the repair cost for type II ovens. A
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