ACTIVITY COST POOLS

Purchasing

Machining

Invented Control

Utilities

Customer Calls

Set up

COST DRIVERS

Number of Orders

Machine Hours

Number of Components

Labour Cost

Number of Calls

Number of set ups

ESTIMATED OVERHEAD $

160,000

130,000

150,000

45,000

15,000

6,000

TOTAL COST DRIVER

40,000

20,000

5000

4,500

3000

2000

Aquamarine Antiques has requested that you analyze two of their products for 2019.

The products are Xx and Xy.

During 2019, the following activity occurred:

ACTIVITY COST POOLS

Purchasing

Machining

Inventory Control

Utilities

Customer Calls

Set up

COST DRIVERS (Product Xx)

90%

50%

20%

6%

50%

75%

Using the information above, determine

(1) the overhead rates

(2) the actual cost assigned for Product Xx and Xy for each activity cost pools using the ABC system for Aquamarine Antiques

Section 2

The results of ABC can provide a more accurate picture of costs.

(1) Discuss the value of Aquamarine Antiques using this system to determine overhead costs.

(2) How might using ABC affect decision making at Aquamarine Antiques?