Actual Activity Standard 1. This product does not require any new design resources. 2. Thirty thousand units were ordered during the year, comprising 600 separate orders. 3. Each standard unit requires 35 minutes of machine time for a total of 17,500 machine-hours. Custom 1. This is a custom product that requires new design resources. 2. There were 400 orders for custom products. Orders for this product are placed separately from orders for standard products. 3. There were 400 custom designs prepared. One custom design was prepared for each order. 4. Because some orders were for more than one unit, a total of 1,250 custom products were produced during the year. A custom product requires an average of 2 machine-hours for a total of 2,500 machine hours. Assigning Overhead Costs to Products Activity Cost Pools (a) Activity Rate (b) Activity (a) (b) ABC Cost Standard Customer orders Product design. Order size Total..... Custom Customer orders. Product design.... Order size Total nueduct Man Product Margins-Activity-Based Costing Standard Custom Sales .......... Costs: Direct materials....... Direct labor Shipping ....... Total Overhead Total cost ....... Total Product margin Per Unit Cost and Product Margin Activity Based Costing Standard $2,660,000 Custom Total $540,000 $3,200,000 Sales Direct costs: Direct materials.. Direct labor....... Shipping $905,500 $263,750 $60,000 $69,500 $87,500 $5,000 $975,000 $351,250 $65,000 *************** Annual Overhead Costs (both Manufacturing and Nonmanufacturing) $500,000 300,000 120,000 80,000 $1,000,000 BRE ERRER Production Department: Indirect factory wages Factory equipment depreciation........ Factory utilities. Factory building lease General Administrative Department: Administrative wages and salaries..... Office equipment depreciation .......... Administrative building lease. Marketing Department: Marketing wages and salaries ...... Selling expenses. Total overhead cost. 400,000 50,000 60.000 510,000 RRRRRRR. 250,000 50,000 **BRER 300,000 $1.810,000 Actual Activity Standard 1. This product does not require any new design resources. 2. Thirty thousand units were ordered during the year, comprising 600 separate orders. 3. Each standard unit requires 35 minutes of machine time for a total of 17,500 machine-hours. Custom 1. This is a custom product that requires new design resources. 2. There were 400 orders for custom products. Orders for this product are placed separately from orders for standard products. 3. There were 400 custom designs prepared. One custom design was prepared for each order. 4. Because some orders were for more than one unit, a total of 1,250 custom products were produced during the year. A custom product requires an average of 2 machine-hours for a total of 2,500 machine hours. Assigning Overhead Costs to Products Activity Cost Pools (a) Activity Rate (b) Activity (a) (b) ABC Cost Standard Customer orders Product design. Order size Total..... Custom Customer orders. Product design.... Order size Total nueduct Man Product Margins-Activity-Based Costing Standard Custom Sales .......... Costs: Direct materials....... Direct labor Shipping ....... Total Overhead Total cost ....... Total Product margin Per Unit Cost and Product Margin Activity Based Costing Standard $2,660,000 Custom Total $540,000 $3,200,000 Sales Direct costs: Direct materials.. Direct labor....... Shipping $905,500 $263,750 $60,000 $69,500 $87,500 $5,000 $975,000 $351,250 $65,000 *************** Annual Overhead Costs (both Manufacturing and Nonmanufacturing) $500,000 300,000 120,000 80,000 $1,000,000 BRE ERRER Production Department: Indirect factory wages Factory equipment depreciation........ Factory utilities. Factory building lease General Administrative Department: Administrative wages and salaries..... Office equipment depreciation .......... Administrative building lease. Marketing Department: Marketing wages and salaries ...... Selling expenses. Total overhead cost. 400,000 50,000 60.000 510,000 RRRRRRR. 250,000 50,000 **BRER 300,000 $1.810,000
