CONTRASTING ACTIVITY -BASED COSTING AND CONVENTIONAL PRODUCT COSTING

Adria company recently made the following estimates of cost and activity in the companys five activity cost pools.

ACTIVITY COST POOL	ACTIVITY MEASURES	EXPECTED OVERHEAD COST	EXPECTED ACTIVITY
Labor- related	Direct labor-hours	$36,000	7,000 DLHs
Purchase orders	Number of orders	4,000	2,000 orders
Material receipts	Number of receipts	$ 10,000	950 receipts
Relay assembly	Number of relays	$7,000	1,000 relays
General factory	Machine-hours	240,000	40,000 MHs

REQIRED:

The expected activity for the year was distributed among the companys four product as follows:

Compute the activity rate for each of the activity cost pools.

EXPECTED ACTIVITY___________
ACTIVITY COST POOL	PRODUCT A		PRODUCT B	PRODUCT C	PRODUCT D
Labor-related (DLHs)		2,400	500	3,500	600
Production orders (orders)		100	350	800	750
Materials receipts (receipts)		400	208	342	0
Relay assembly (relays)		170	170	300	360
General factory (MHs)		12,000	7,000	8,000	13,000

Using the ABC data, determine the total amount of overhead cost assigned to each product.

Assume the prior to implementing ABC used a conventional cost system that applied all manufacturing overhead to products based on machine hours. Explain how the conventional cost assignment would differ from the activity-based cost assignment with respect to Product C.