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How do i calculate the cost of product under the simple traditional costing system and activity based costing system? and what can be said with
How do i calculate the cost of product under the simple traditional costing system and activity based costing system? and what can be said with the results?
Commercial Domestic Units produced and sold 1,000 10,000 Sales Price (Average) $27,750 $1,500 Total Per unit Total Per unit Direct Materials $6,000,000 $6,000 $2,000,000 $200 Direct Manufacturing Labour $2,000,000 $2,000 $1,500,000 $150 Machine Costs $2,000,000 $2,000 $1,000,000 $100 Total Direct Costs $10,000,000 $10,000 $4,500,000 $450 Manufacturing Overhead Costs $8,500,000 $8,500 $5,500,000 $550 Total Cost of Goods Sold $18,500,000 $18,500 $10,000,000 $1,000 *Manufacturing overhead costs were allocated per machine hour, the commercial units used 1.7 machine hour per unit and the domestic used 6.6 (approx.) minutes per unit. John began his tenure at the company by closely examining the manufacturing process. The process required for making sunshade stands substantially differed between the domestic and commercial sunshade stands. In addition, sunshade stands for commercial use were manufactured in very small batches to assure uniform quality from one product to the next. On further investigation of the production process, John was able to identify the following activities and their related costs that were used in producing the two different products. Units of the Cost Allocation Base Commercial Domestic 40,000 20 Activity Cost Total Activity Allocation Base Costs Soldering number of solder points $4,000,000 Shipments number of shipments $1,800,000 Quality control number of inspections $2,200,000 Purchase orders number of orders $1,400,000 Machine power machine hours $3,000,000 Machine setups number of setups $1,600,000 Total manufacturing overhead $14,000,000 15,000 1,000 1,000 1,000 1,700 1,000 100 50 1,100 100Step by Step Solution
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