Activities and Activity-Based Costing
Activities and Activity-Based Costing
Byte Computer Company, a manufacturing organization, has just completed an order that Grater, Ltd., placed for 80 computers. Byte recently shifted from a traditional system of allocating costs to an activity-based costing system. Simone Faure, Byte’s controller, wants to know the impact that the ABC system had on the Grater order. Direct materials, purchased parts, and direct labor costs for the Grater order are as follows.
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Cost of direct materials
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$36,750.00
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Direct labor hours
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220
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Cost of purchased parts
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$21,300.00
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Average direct labor pay rate
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$15.25
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Other operating costs are as follows:
Traditional costing data:
Overhead costs were applied at a single, plant wide overhead rate of 270 percent of direct labor dollars.
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Activity
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Cost Driver
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Activity Cost Rate
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Activity Usage for
Grater Order
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Electrical engineering design
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Engineering hours
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$19.50 per engineering hour
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32 engineering hours
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Setup
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Number of setups
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$29.40 per setup
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11 setups
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Parts production
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Machine hours
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$26.30 per machine hour
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134 machine hours
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Product testing
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Product testing hours
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$32.80 per product testing hour
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52 product testing hours
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Packaging
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Packaging hours
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$17.50 per packaging hour
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22 packaging hours
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Building occupancy
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Machine hours
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$9.80 per machine hour
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134 machine hours
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Required
1. Using the traditional costing method, compute the total cost of the Grater order.
2. Using the activity-based costing method, compute the total cost of the Grater order.
3. Manager Insight: What difference in the amount of cost assigned to the Grater order resulted from the shift to activity-based costing? Was Byte’s shift to activity-based costing a good management decision?
Answers
Status NEW
Posted 01 May 2017 05:05 PM
My Price 10.00
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Attachments
file 1493660494-870101_1_636291909634759896_Activity-vs-Traditonal-costing.xlsx preview (394 words )
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