ABC costing and traditional costing methods
Compare and contrast ABC costing and traditional costing methods, giving examples.
In the assigned case, which system provides a more accurate picture of the cost incurred to produce the jobs?
Provide examples of manufacturers in your geographic area and explain which system would be best for them.
Records for two clients appear here: Total Total Total Programming Direct Number Direct Labor Number Job Costs of Designs Hours of Tests Owen's Trains 11,200 700 Caleigh's Cookies 500 100 Requirements 1. Compute the total cost of each job. 2. Is the job cost greater or less than that computed in Problem 16-37 for each job? Why? 3. If Haupt wants to earn profits equal to 25% of sales revenue, how much (what fee) should it charge each of these two clients? Apply Your Knowledge •Decision Cases 942 Chapter 17 Case 1. Harris Systems specializes in servers for workgroup, e-commerce, and ERP applica- tions. The company's original job costing system has two direct cost categories: direct materials and direct labor. Overhead is allocated to jobs at the single rate of $22 per direct labor hour. A task force headed by Harris's CFO recently designed an ABC system with four activities. The ABC system retains the current system's two direct cost categories. Thus, it budgets only overhead costs for each activity. Pertinent data follow: Activity Allocation Base Cost Allocation Rate Materials handling Number of parts $ 0.85 Machine setup Number of setups 500.00 Assembling Assembling hours 80.00 Shipping Number of shipments 1,500.00 Harris Systems has been awarded two new contracts, which will be produced as Job A and Job B. Budget data relating to the contracts follow: Job A JobB Number of parts . .............................. 15,000 2,000 Number of setups . ............................ 6 4 Number of assembling hours . ........... 1,500 200 Number of shipments . ...................... 1 Total direct labor hours . .................. 8,000 600 Number of output units . .................. 100 10 Direct materials cost ......................... $220,000 $30,000 Direct labor cost . .............................. $160,000 $12,000
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Posted 21 Dec 2017 02:12 PM
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