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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 Mass Production Custom Product Sales and Production Units 2.500 Sales Price per Unit $ 1,1005 1,500 Units Costs Direct Material $ 500 5 600 Direct Labor $ 200 $ 400 Overhead 500 You have been asked to establish activities and cont drivers for each department and have determined the fotowing regarding the overhead pool: Cost Pool Amount Driver Total Driver Activity Mass Production Custom Product Building Equipment Materials Ordering Quality Control Maintenance & Security 70,000 Square Footage 50,000 Machine Hours 60,000 Number of orders 45,000 Number of inspections 30,000 Square Footage 8,000 5.000 400 300 8,000 6,000 3,000 100 200 6,000 2,000 2,000 300 100 2.000 $ Total $ 255,000 a) Please calculate the cost per activity for each cost pool b) Please calculato a P&L for both product lines using the ABC method to allocate the $255,000 of Overheads
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