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2) Activity Based Costing (ABC) The B&R Company has two sales channels. The first is a mass production product while the second is a custom
2) Activity Based Costing (ABC) The B&R Company has two sales channels. The first is a mass production product while the second is a custom product. B&R has the following budget information for the two products for the upcoming year Sales and Production Units Sales Price per Unit Units Costs Direct Material Direct Labor Overhead Mass Production 2,500 Custom Product 500 1,100 1,500 500 200 600 400 You have been asked to establish activities and cost drivers for each department and have determined the following regarding the overhead pool: Cost Pool Amount Driver Driver Activity Total Mass Production Custom Product Building Equipment Materials Ordering Quality Control Maintenance & Security 70,000 Square Footage 8,000 6,000 2,000 50,000 60,000 Machine Hours 5,000 3,000 2,000 Number of orders 400 100 300 45,000 Number of Inspections 300 200 100 30,000 Square Footage 8,000 6,000 2,000 Total 255,000 a) Please calculate the cost per activity for each cost pool. b) Please calculate a P&L for both product lines using the ABC method to allocate the $255,000 of Overheads
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