Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Clairepoint Medical Devices, Incorporated (CMDI) makes three types of diagnostic devices. For internal purposes, these models are referred to as Alpha, Beta, and Gamma, respectively.

Clairepoint Medical Devices, Incorporated (CMDI) makes three types of diagnostic devices. For internal purposes, these models are referred to as Alpha, Beta, and Gamma, respectively. Although they are designed to provide the same information, the models differ by the quality of the materials and their electronic capabilities. The Alpha model is a relatively simple device that requires more manual data entry and retrieval. The Gamma model automates much of the interface with the user. As a purveyor of certain medical devices, including these models, CMDI requires certification for each model, regardless of the number of units sold.

CMDI computes product costs by allocating all manufacturing overhead to products based on direct labor costs. After attending a seminar on financial analysis, the chief marketing officer (CMO) of CMDI asked the plant controller about ABC and whether it could be used for the costing of these three models. To respond to the request, the controller collected the following information for the upcoming period:

ActivityRecommended Cost DriverEstimated Cost
Obtaining certificatesNumber of certificates$ 105,000
Handling materialsDirect materials cost204,750
Setting upProduction runs155,500
EngineeringNumber of units320,000
Assuring qualityNumber of inspections104,000
ShippingProduction runs220,000


$ 1,109,250

Product-line information for the upcoming period follows:


AlphaBetaGamma
Number of units produced2,5001,000500
Direct materials cost (total)$ 212,500$ 145,000$ 130,000
Direct labor cost (total)$ 262,500$ 105,000$ 67,500
Number of certificates111
Number of production runs5510
Number of inspections2410


(Static) Activity-Based Costing: Analysis and Visualization 

Required:

Compute the unit product costs for the upcoming period using the current system, which allocates overhead based on direct labor costs.

Compute the unit product costs for the upcoming period based on an ABC system using the activities and cost drivers identified by the controller.

Step by Step Solution

3.39 Rating (152 Votes )

There are 3 Steps involved in it

Step: 1

Here are the unit product cost calculations Current system OH allocated on direct labor cost Total M... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles of Auditing and Other Assurance Services

Authors: Ray Whittington, Kurt Pany

19th edition

978-0077804770, 78025613, 77804775, 978-0078025617

More Books

Students also viewed these Accounting questions

Question

What is the basic purpose of a code of ethics for a profession?

Answered: 1 week ago

Question

compare and contrast orientations to the field, and

Answered: 1 week ago

Question

Define science and explain four of its major goals.

Answered: 1 week ago