Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Kindness Inc. produces 2 types of products, Rome and Summer. It expects to produce 40,000 units of Rome and 50,000 units of Summer. Direct material
Kindness Inc. produces 2 types of products, \"Rome" and \"Summer\". It expects to produce 40,000 units of Rome and 50,000 units of Summer. Direct material cost in 2021 is expected to be $39 .00 per unit for Rome and $45 .00 per unit for Summer. Kindness' total direct labour cost for Rome is expech to be $1,500,000 and $1,250,000 for Summer. Other manufacturing costs are considered as overhead. The estimated total annual overhead for the year is $2,950,000. Presently, Kindness allocates its overheads based on direct labour hours. Rome requires 1.5 direct labour hours, whilst Summer requires 1.0 direct labour hours per unit to complete. The company is deciding to use the activity-based costing (ABC) system to allocate all its overheads. Kindness obtained the following information: Cost Driver Rome Summer Power Machine Hours 120,000 430,000 Engineering Engineering Hours 48,000 T2900 Setup No. of Setups 1 3 The company estimates that Power costs amounts to $1 ,900 ,000; Engineering costs amounts to $800,000; and Setup costs amounts to $2?0 ,000. Required : (a) Calculate the total cost of Rome and total cost of Summer (assuming that the expected no. of units are produced} using the traditional costing system. (b) Calculate the total cost of Rome and total cost of Summer (assuming that the expected no. of units are produced} using the activity-based costing system
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started