You are a manager at PopUp Company, who manufactures toaster ovens.Your company produces two types of toaster ovens: basic and deluxe.PopUp Company currently uses a traditional unit-based costing system, however, you feel strongly the company should switch to an activity-based costing system.You believe this change would provide you more accurate costing information, which would allow for better strategic decision making.You need to prepare a number of documents in order to convince the CFO to change the current cost management system used by your company.

Part 2:Compute the unit cost of both the basic and deluxe toaster using both the unit-based approach, and the activity-based costing approach.Use the data and template provided in this file:Part 2 Writing Project.xls Click for more options.Also, preparesample budgeted income statements and balance sheets based on the costing data you calculated. You can make your own assumptions related to the number needed to complete these statements.

PopUp Company produces two types of toasters, basic and deluxe.For the current period, the company reports the following data:

Basic Toaster Deluxe Toaster

Volume 20,000 units 5,000 units

Machine Hours 1,000 2,400

Batches 315 125

Engineering Modifications 20 50

Prime Costs $20,000 $30,000

Market Price $25 per unit $60 per unit

Additional Information Follows

Costs Driver

Engineering Support $15,900 Engineering Modifications

Electricity 25,000 Machine Hours

Setup costs 33,900 Batches

1) Compute the manufacturing cost per unit of each toaster using the current unit-based approach. Under this system costs are assigned to the toasters on the basis of machine hours.

2) Compute the manufacturing cost per unit of each toaster using an activity-based costing approach