ABC Inc. produces a single product and manufactured 30,000 units last year. The company budgeted the following
Question:
ABC Inc. produces a single product and manufactured 30,000 units last year. The company budgeted the following overhead costs for the year:
Indirect Factory Wages: | $ | 100,000 |
Factory Utilities: | $ | 25,000 |
Factory Depreciation: | $ | 25,000 |
Direct manufacturing costs per unit are $50.
The company uses an activity-based costing system which compiles costs into 3 cost pools, machining, milling and assembly.
The costs allocated to these activity cost pools break down as follows:
Usage:
Cost: | Machining | Milling | Assembly | |||
Indirect Factory Wages: | 50 | % | 30 | % | 20 | % |
Factory Utilities: | 40 | % | 40 | % | 20 | % |
Factory Depreciation: | 10 | % | 90 | % | 0 | % |
The following cost drivers are used for each of the following activity cost pools:
Machining: Machine Hours
Milling: Milling Hours
Assembly: Direct Labour Hours
Practical capacity for each of the cost pools are shown below:
Machining: 31,250 Machine Hours.
Milling: 25,000 Milling Hours.
Assembly: 12,500 Direct Labour Hours
Actual Usage was as follows:
Machining: 40,000 Machine Hours.
Milling: 40,000 Milling Hours.
Assembly: 15,000 Direct Labour Hours
Each unit requires a budgeted 2 Machine hours, 1 Milling Hour and 4 Direct Labour Hours.
ABC's policy is to apply a mark-up of 300% on cost.
What is the budgeted selling price for each unit of product using activity-based costing?
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer