ADA Pharmaceutical Company produces three drugs-Diomycin, Homycin, and Addolin-belonging to the analgesic (pain- killer) family of...

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ADA Pharmaceutical Company produces three drugs-Diomycin, Homycin, and Addolin-belonging to the analgesic (pain- killer) family of medication. Since its inception four years ago, ADA has used a direct labor hour-based system to assign manufacturing overhead costs to products. Eme Weissman, the president of ADA Pharmaceutical, has just read about activity-based costing in a trade journal. With some curiosity and interest, she asked her financial controller, Takedo Simon, to examine differences in product costs between the firm's current costing and activity-based costing systems. ADA has the following budget information for the year: Cost of direct materials Cost of direct labor Number of direct labor hours Diomycin $ 213,000 258,000 7,280 1,080,000 Homycin $273,000 242,000 6,880 508,000 Addolin $266,000 271,000 2,080 308,000 Number of capsules ADA has identified the following activities and cost drivers and has assigned them a total overhead cost of $204,000. Activity Machine setup Plant management Supervision of direct labor Quality inspection Order expediting Cost Driver Setup hours Number of Workers Direct labor hours Inspection hours Customers served Total overhead Budgeted Budgeted Cost Overhead Driver Cost Volume $ 16,800 1,680 36,800 1,280 46,800 16,800 51,200 1,090 52,400 685 $204,000 ADA Pharmaceutical Company produces three drugs-Diomycin, Homycin, and Addolin-belonging to the analgesic (pain- killer) family of medication. Since its inception four years ago, ADA has used a direct labor hour-based system to assign manufacturing overhead costs to products. Eme Weissman, the president of ADA Pharmaceutical, has just read about activity-based costing in a trade journal. With some curiosity and interest, she asked her financial controller, Takedo Simon, to examine differences in product costs between the firm's current costing and activity-based costing systems. ADA has the following budget information for the year: Cost of direct materials Cost of direct labor Number of direct labor hours Diomycin $ 213,000 258,000 7,280 1,080,000 Homycin $273,000 242,000 6,880 508,000 Addolin $266,000 271,000 2,080 308,000 Number of capsules ADA has identified the following activities and cost drivers and has assigned them a total overhead cost of $204,000. Activity Machine setup Plant management Supervision of direct labor Quality inspection Order expediting Cost Driver Setup hours Number of Workers Direct labor hours Inspection hours Customers served Total overhead Budgeted Budgeted Cost Overhead Driver Cost Volume $ 16,800 1,680 36,800 1,280 46,800 16,800 51,200 1,090 52,400 685 $204,000