ACC 212 Challenge Activity-Based Costing HEY Company has been concerned about the profitability of the company product lines wants you to examine the current station using traditional approach of locating overhead he wants you to apy Art Based Costin (ABC) to develop a new product cost for each product the wants your own about the best approach to use to determine the producti o n he Revenue: The expected level of sales is 200 units of each product Product A Product priceperit price per $12.000 $19.000 Costs The expected level of production is 200 units of each product 1. Direct Material cost per unit Product A Direct Material cost per unit Product $5,400 58.370 2. Direct Labor cost per unit Product A Direct Labor cost per unit Product $340 5700 3. Factory Overhead Activities: a. Every product is inspected. b. Product A moving parts oiled: Product B moving parts oiled: 5 parts per unit 3 parts per unit c. Material is delivered to each of the product lines on a daily basis. Product A 5 times per week Product B 5 times per week d. Product A redesign: Product Bredesign: 5 hours per week 20 hours per week e. Product A supplier purchase orders: Product B supplier purchase orders: 5 times per week 2 times per month f. Facility administration is based on square footage: Product A 12,000 square feet Product B 8,000 square feet Activity Inspection Lubricating oil Material handling Product design Purchase orders Facility Administration Total factory overhead Total Estimated Annual Activity Cost Cost Driver units oil applications deliveries redesign hours purchase orders square footage Estimated Cost $93.000 $5,800 $12,200 $121,000 $48.000 $32,000 $312.000 CA ACC Whi ACC 212 Challenge Name: For this challenge, both Product A and Product B have a planned level of production of 200 units each You will need to use the per una data on the first page and the planned number of units in production to calculate the total planned levels of activity 1. Calculate the factory overhead using traditionally allocated predetermined overhead rate of 150N of direct labor cost Total Overhead Direct Labor Cost Overhead Allocation per Allocation (200 units per Unit unit of product) D. horizo 2. Calculate the factory overhead allocated to the product lines using Activity Based Costing (ABC) method. Calculate the planned activity level for 200 units Product A Activity level Product Activity level Total Planned Cost Driver for 200 units for 200 Units Activity Level products inspected w of applications The analy vertical overy redesign hours purchase orders square foota 2:1 my rep b. Calculate the planned activity rate for each cost pool using the Activity-Based Costing Method. (Round rate to 3 decimal places for product design, material handling, and purchases orders) Estimated Cost per Total Planned Activity Activity Activity level Planned Activity Rate Inspection 93.000 lubricating of $5,800 Material handling $12,200 Product design $121,000 Purchase orders $48.000 Facility Administration $32,000 To C. Calculate the total overhead assigned to each activity using the Activity-Based Costing Method (Round to a whole number) Activity 1 Product Product B Total inspection s Lubricating oil s Material handling $ $ Product design s SS Purchase orders S $ Facility Administration s $ Total S S S Overhead per unit s Name: Challenge #4 totalmerhead based on traditional method vs. activity ACC 212 3. Complete the following table to based costing method Factory Overhead duct A-200 units duct 8 - 200 Total Traditional Activity-Based Costing method of locating overhead Product Product 4. Calculate the unit cost Traditional Method Direct materials per product Direct labor per product Factory overhead per product Total cost per product 15 s s s Product Product s ABC Method Direct materials per product Direct labor per product Factory overhead per product Total cost per product $ $ 5. Calculate the estimated gross profit for each under traditional and Activity Based Costing Traditional Revenue of Goods Sold Gross Profit is s S S roduct Product B ABC Revenue Cost of Goods Sold Gross Profit S $ $ 6. Were the products underpriced or overpriced when comparing traditional method versus the activity-based costing method? Product : underlover Product B: under/over 7. Under which method is the most overhead charged to production this year? 8. How will this affect net income? 9. Give an advantage and disadvantage for each method. Traditional - Advantange Traditional - Disadvantage - Advantage ABC-Disadvantage