Does anyone know this? Thank you in advance!
The next three questions are based on the following: A company is considering switching to an activity-based costing (ABC) system. The company produces and sells two products: Basic and Pro. The production of the Pro products requires more expensive materials and more experienced workers. The company consists of two departments: Production (where all manufacturing activities are taken) and Marketing (which engages in selling and admin activity only). The company's traditional costing system computes unit product costs as dictated by GAAP; direct labor cost DLC) is used as the allocation base for manufacturing overhead cost (the overhead rate is rounded to the nearest cent). The ABC system will include in unit costs all costs easily associated with units. In addition, in the ABC system, there are four major indirect activities: Machine Setups, Special Processing, Factory Supervision, and Customer Relations. In the ABC system, Customer Relations costs will be associated with customers; the rest of the costs will be associated with units ofthe two products. 9% of Customer Relations cost relates to manufacturing and is incurred in the Production Department, the rest of the Customer Relations cost is incurred in the Marketing Department. The prices, direct material cost (DM), shipping cost and DLHs below are given for one unit of the product Shipping Cost Price S150 S250 our Wage-DL S10 S15 DLHs Product Basic Pro DM $44 $60 Units 6000 4000 S3 The company collected the data for ABC as follows Estimated OH cost S 360,000 S 135,000 S 225,000 S 200,000 Activity measures used Pro 120 8,000 12,000 Activity Cost Pool Activity Measure # of setups Machine hours DLC # of customers Basic 40 Machine Setup Special Processing Factory Supervision Customer Relations (on 5 customers 4 What is the difference between the Pro product's unit costs computed by the traditional and ABC systems? A. Under the traditional costing system, the unit cost of the Pro product is higher by B. Under the traditional costing system, the unit cost of the Pro product is lower by C. Under the traditional costing system, the unit cost of the Pro product is higher by D. Under the traditional costing system, the unit cost of the Pro product is lower by E. None of the above S 2.25 per unit. S 2.25 per unit. S 5.25 per unit. S 5.25 per unit. 5 Unit-level activities include (choose the most complete answer): A. Machine Setup B. Special Processing C. Factory Supervision D. Machine Setup, Special Processing, and Factory Supervision E. Special Processing and Factory Supervision 6 The company has two major customers, who buy their products in the amounts in the table below Customer 1,000 2,000 2,000 units 1,000 units asic Pro How much is the ABC customer margin of customer B? (Choose the closest amount) A. $113,750 $148,750 S108,750 $153,750 E. None of the above C
