Maurice Tutor

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  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 24 Sep 2017 My Price 10.00

Kauli Company

Activity-Based Costing

Kauli Company produces cellular phones. It has just completed an order for 10,000 phones placed by Stay Connect, Ltd. Kauli recently shifted to an activity based costing system, and its controller is interested in the impact that the ABC system had on the Stay Connect order. Data for that order are as follows: direct materials, $36,950; purchased parts, $21,100; direct labor hours, 220; average direct labor pay rate per hour, $15.

Under Kauli’s traditional costing system, overhead costs were assigned at a rate of 270 percent of direct labor cost.

Data for activity-based costing for the Stay Connect order are as follows:

Activity

Cost Driver

Activity Cost Rate

Activity Usage

Electrical

Engineering hours

$19 per engineering

32 engineering

engineering design

  

hour

hours

Setup

Number of setups

$29 per setup

11 setups

Parts production

Machine hours

$26 per machine

134 machine
   

hour

hours

Product testing

Number of tests

$32 per test

52 tests

Packaging

Number of

$0.0374 per package

10,000
 

packages

  

packages

Building occupancy

Machine hours

$9.80 per machine

134 machine
   

hour

hours

Assembly

Direct labor hours

$15 per direct labor

220 direct
   

hour

labor hours

Required

1. Use the traditional costing approach to compute the total cost and the product unit cost of the Stay Connect order.

2. Using the cost hierarchy, identify each activity as unit level, batch level, product level, or facility level.

3. Prepare a bill of activities for the activity costs.

4. Use ABC to compute the total cost and product unit cost of the Stay Connect order.

5. What is the difference between the product unit cost you computed using the traditional approach and the one you computed using ABC? Does the use of ABC guarantee cost reduction for every order?

Answers

Maurice Tutor
(5)
Status NEW Posted 24 Sep 2017 11:09 PM My Price 10.00

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