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Koontz's production manager has suggested using activity-based costing instead of either the plantwide or departmental approaches. To facilitate the necessary calculations, she assigned the company's
Koontz's production manager has suggested using activity-based costing instead of either the plantwide or departmental approaches. To facilitate the necessary calculations, she assigned the company's total manufacturing overhead costs to be five activity cost pools as follows: She also determined that the average order size for the basic and Advanced models is 400 units and 50 units, respectively. The molding machines require a setup for each other. One setup hour is required for each customer order of the Basic model and three hours are required to setup for an order of the Advanced model. The company pays sales commissions of 5% for the Basic model and 10% for the Advanced model. Its traceable fixed advertising costs include exist 150,000 for the Basic model and exist200,000 for the Advanced model. The remainder of the company's selling and administrative costs are organization-sustaining in nature. Using the additional information provided by the production manager, calculate: a. an activity rate for each activity cost pool. b. The total manufacturing overhead cost allocated to the Basic model and the Advanced model using the activity-based approach. c. The total selling and administrative cost traced to the Basic model and the Advanced model using the activity-based approach. Using your activity-based cost assignments from requirement 3, prepare a contribution format segmented income statement that is adapted from Using your contribution format segmented income statement from requirement 4, calculate the break-even point in dollar sales for the Advanced model
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