Hello, I need Product S & Product T responded at the bottom please (activity based costing). Thank you. The first one already has the responses in it correctly (Activity based costing).

Mastery Problem: Activity-Based Costing (Advanced)

Question Content Area

Activity-Based Costing

Traditionally, overhead costs are assigned based arbitrarily on the rate of either direct labor or direct materials associated with production. This makes sense when companies only make a few products, production processes are simple, and overhead costs are less pervasive. However, today production processes are more complex, companies make a wider array of products, and fewer costs are directly traceable to units of production. To address this, companies use activity-based costing (ABC).

Specifically, activity-based costing identifies and traces costs and expenses to activities and then to specific products. ABC uses multiple factory overhead rates based on activities. Activities are the types of work, or actions, involved in a manufacturing process or service activity. For example, assembly, inspection, and engineering design are activities.

The estimated activity costs are allocated to products using an activity rate. Activity rates are determined as follows: Activity Rate = Estimated Activity Cost / Estimated Activity Base Usage

Illustrated Example of Activity-Based Costing

Comparing Two Products under Traditional and Activity-Based Costing

Compare two projects under development by the same company. The following are a few aspects of each product's development process relevant to costs.

Product S		Product T
Requires 3,200 hours of testing		Requires 800 hours of testing
Requires 5,320 units of computing power		Requires 2,280 units of computing power
Requires 20 developer hours to implement		Requires 80 developer hours to implement

Cost Items	Cost of Each Activity
Testing:	$30,400
Computing power:	$45,600
Developer hourly cost:	$10 per hour

Traditional Costing

Traditional costing would take the proportion of a direct cost, such as direct labor hours, and use it as the basis for allocating overhead costs, such as computing power and testing. In the following table, use developer hours as the basis for assigning overhead costs (computing and developer costs) to each project. If required, round your answers to the nearest dollar.

Product S		Product T
Percentage of developer hours	20%		Percentage of developer hours	80%
Testing cost	$fill in the blank 6,080		Testing cost	$fill in the blank 24,320
Computing cost	$fill in the blank 9,120		Computing cost	$fill in the blank 36,480
Developer cost	$fill in the blank 200		Developer cost	$fill in the blank 800
Total cost	$fill in the blank 15,400		Total cost	$fill in the blank 61,600

Percentage of developer hours

+ Percentage of developer hours for Product S (20%)

Allocation basis for Product S: The amount of labor hours associated directly with Product S, as a percentage of all developer hours worked (regardless of product). The amounts for overhead to be allocated are multiplied by this value to determine the overhead to be assigned to Product S under the traditional costing method.

20

(20+80)

+ Percentage of developer hours for Product T (80%)

Allocation basis for Product T: The amount of labor hours associated directly with Product T, as a percentage of all developer hours worked (regardless of product). The amounts for overhead to be allocated are multiplied by this value to determine the overhead to be assigned to Product T under the traditional costing method.

80

(20+80)

Review the resources each product (S and T) requires for production and compare that to the costs calculated above under traditional costing. Does traditional costing serve as an accurate gauge of costs?

YesNoNot enough informationNo

Feedback Area

Feedback

Using traditional cost assignment means pegging overhead costs based on a direct cost, such as direct labor or direct materials. In this case, you use direct labor (developer hours) as the basis for overhead allocation.

For product S, the percentage of developer labor costs as a proportion of the whole is already calculated. This is the figure that, when multiplied by the overhead values, will yield the overhead assigned to each project under traditional costing.

Question Content Area

Activity-Based Costing

Using the data above for products S and T, calculate the costs using activity-based costing. Allocate the costs of testing, computing, and development based on the rates of activity consumed by each product's development process. If required in your computations, round per unit costs to the nearest cent. Round your final answers to the nearest dollar.

Cost	Activity Base
Testing	Hours of testing
Computing cost	Units of computing power
Developer cost	Development hours

Product S		Product T
Testing cost	$fill in the blank		Testing cost	$fill in the blank
Computing cost	$fill in the blank		Computing cost	$fill in the blank
Developer cost	$fill in the blank 200		Developer cost	$fill in the blank 800
Total cost	$fill in the blank		Total cost	$fill in the blank