4-4 Activity-Based Costing The Toys Rhin Company makes a variety of dolls at its operation in Spain. Its manufacturing process is highly automated. A recently installed ABC system has four activity centers: Indirect Resource Activity Center Materials receiving and handling Production setup Cutting, sewing, and assembly Packing and shipping Cost Driver Kilograms of materials Number of setups Number of units Number of orders Cost per Driver Unit .85 per kg 60 persetup .50 per unit 7 per order Two dolls are called "Ann" and "Andy." They require 10 and 20 kg of materials, respectively,at a materials costof.75 for Ann and 1.10 for Andy. One computer-controlled assembly line makes all dolls. When a production run of a different doll is started, a setup procedure is required to reprogram the computers and make other changes in the process. Normally, 550 Ann dolls are produced per setup, but for Andy dolls only 110 are produced persetup. Products are packed and shipped separately so a request from a customer for, say, three different products is considered three different orders Suppose the gift shop at the Spain Toy Museum just placed an order for 170 Ann dolls and 125 Andy dolls 1. Compute the cost of the products shipped to the Spain Toy Museum gift shop. 2 Suppose the products made for the Spain Toy Museum gift shop required "Rhin" to be printed on each doll. Because of the automated process, printing the letters takes no extra time or materials, but it requires a special production setup for each product. Compute the cost of the products shipped to the Spain Toy Museum gift shop. 3. Explain how the activity-based-costing system helps the Toy Company to measure costs of individual products or orders better than a traditional system that allocates all non-materials costs based on direct labor. 4-4 Activity-Based Costing The Toys Rhin Company makes a variety of dolls at its operation in Spain. Its manufacturing process is highly automated. A recently installed ABC system has four activity centers: Indirect Resource Activity Center Materials receiving and handling Production setup Cutting, sewing, and assembly Packing and shipping Cost Driver Kilograms of materials Number of setups Number of units Number of orders Cost per Driver Unit .85 per kg 60 persetup .50 per unit 7 per order Two dolls are called "Ann" and "Andy." They require 10 and 20 kg of materials, respectively,at a materials costof.75 for Ann and 1.10 for Andy. One computer-controlled assembly line makes all dolls. When a production run of a different doll is started, a setup procedure is required to reprogram the computers and make other changes in the process. Normally, 550 Ann dolls are produced per setup, but for Andy dolls only 110 are produced persetup. Products are packed and shipped separately so a request from a customer for, say, three different products is considered three different orders Suppose the gift shop at the Spain Toy Museum just placed an order for 170 Ann dolls and 125 Andy dolls 1. Compute the cost of the products shipped to the Spain Toy Museum gift shop. 2 Suppose the products made for the Spain Toy Museum gift shop required "Rhin" to be printed on each doll. Because of the automated process, printing the letters takes no extra time or materials, but it requires a special production setup for each product. Compute the cost of the products shipped to the Spain Toy Museum gift shop. 3. Explain how the activity-based-costing system helps the Toy Company to measure costs of individual products or orders better than a traditional system that allocates all non-materials costs based on direct labor
