Question
I need detailed help with steps, if you can also show how to calculate unit product cost for each product that would help. A company
I need detailed help with steps, if you can also show how to calculate unit product cost for each product that would help.
A company is considering the adoption of an ABC system because the managers suspect that their traditional costing system distorts product costs. The company produces and sells two products, Standard and Deluxe. Their traditional costing system uses machine hours as the allocation base for manufacturing overhead cost. The production managers decided that the major activities are Assembly, Machine Setups, and Parts Administration and determined the costs for each activity. They also identified how many machine hours, setups, and parts each product requires.
Additional info:
Price : Standard : $120 per unit , Deluxe : $150 per unit
Cost :
Direct Materials : Standard : $32 per unit Deluxe : $36 per unit
Direct Labor : Standard : $15 per unit Deluxe : $25 per unit
Units Produced : Standard : 200,000 units Deluxe : 100,000 units
Activity:
Assembly (Machine Hours) : Standard : 100,000 Deluxe : 200,000
Machine Setups : Standard : 100 Deluxe : 400
Parts Administration : Standard : 200 Deluxe : 200
Overhead :
Assembly Cost : $1,200,000
Machine Setups : $900,000
Parts Administration : $300,000
Question :
The company is assumed to spend equal money on customer relations among its two customers A and B. Total costs of customer relation for these two customers are $10,000. Customer A placed an order as below. Using the ABC system, the customer margin of customer A is (choose closest answer): Standard : 100 units
Deluxe : 250 units
A) $44,960 B) $45,100 C) $20,010 D) $20,150 E) $25,010
Answer was C) but I need help with steps as to why
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