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Collected Links [:1 Bookmarks 00 Reading List C eck My Work ( Previous Assignment Score: 50% All work saved. Submit Assignment for Grading > 0 'El Hv2.cengagenow.com O] (D [B + 6' G "9 0 I Weeki-StudyplanChapterio @ Untitled Week 1 - Assignment Mastery Problem: Activity-Based Costing (Advanced) 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). Specically, activitybased costing identies and traces costs and expenses to activities and then to specic 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 testlng Requires 800 hours of testing Requires 5,110 units of computing power Requires 2,190 units of computing power Requires 25 developer hours to implement Requires 75 developer hours to implement Cost Items Cost of Each Activity Testing: $29,200 Week 1 - Assignment Week1 - Assignment 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 5,110 units of computing power Requires 2,190 unis of computing power Requires 25 developer hours to implement Requires 75 developer hours to implement Cost Items Cost of Each Activity Testing: $29,200 Computing power: $43,800 Developer hourly cost: $14 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 25% Percentage of developer hours 75% Testing cost $ 2-28 X Testing cost $:] Computing cost $ Computing cost $[:] Developer cost $ Developer cost $: Total cost $ Total cost 35:]