Activity-based job costing, unit cost comparisons. (30 mins)

Aircomposystemes, SA, has a machining facility specialising in work for the aircraft components market. The prior job-costing system had two direct-cost categories (direct materials and direct manufacturing labour)

and a single indirect-cost pool (manufacturing overhead, allocated using direct labour-hours). The indirect cost-allocation rate of the prior system for 2000 would have been SFr 115 per direct manufacturing labour-hour.

Recently, a team with members from product design, manufacturing and accounting used an activity-based approach to refine its job-costing system. The two direct-cost categories were retained. The team decided to replace the single indirect-cost pool with five indirect-cost pools. These five cost pools represent five activity areas at the facility, each with its Own supervisor and budget responsibility. Pertinent data are as follows: bhyt45

1. Calculate the per unit manufacturing costs of each job under the prior jobcosting system.
2. Calculate the per unit manufacturing costs of each job under the activitybased job-costing system.
3. Compare the per unit cost figures for Jobs 410 and 411 calculated in requirements 1 and 2. Why do the prior and the activity-based costing systems differ in their job cost estimates for each job? Why might these differences be important to Aircomposystemes?

Transcribed Image Text:

ACTIVITY AREA Materials handling Lathe work Milling Grinding Testing COST DRIVER USED AS ALLOCATION BASE Parts Turns Parts Machine-hours Units tested COST-ALLOCATION RATE SFr 0.40 0.20 20.00 0.80 15.00 Information-gathering technology has advanced to the point where all the data necessary for budgeting in these five activity areas are automati- cally collected. Two representative jobs processed under the new system at the facility in the most recent period had the following characteristics: JOB 411 Direct materials cost per job Direct manufacturing labour cost per job Direct manufacturing labour-hours per job Parts per job Turns per job Machine hours per job Units per job JOB 410 SFr 9,700 SFr 59,900 750 11,250 25 375 500 2,000 20,000 60,000 150 10 1,050 200