Noriko Fujita is the controller of Nakamura, Inc., an electronic controls company located in Yokohama. She recently attended a seminar on activity-based costing (ABC) in Tokyo. Nakamura's traditional cost accounting system has three cost categories: direct materials, direct labor, and indirect production costs. The company allocates indirect production costs on the basis of direct-labor cost. The following is the 20x0 budget for the automotive controls department in thousands of Japanese yen): (Click the icon to view the 20x0 budget.) Requirement 1. Explain how Nakamura, Inc., allocates its indirect production costs using its traditional cost system The traditional cost system allocates indirect production costs based entirely on direct labor cost. Select the formula(s) and then calculate the indirect cost rate(s) under the traditional cost system. (Only use as mar decimal places, XX.) Indirect cost rate formula Indirect cost rate = 11 * Requirements d 1. Explain how Nakamura, Inc., allocates its indirect production costs using its traditional cost system. Include a computation of the allocation rate used. 2. Explain how Nakamura, Inc., would allocate indirect production costs under Ms. Fujita's proposed ABC system. Include a computation of all the allocation rates used. 3. Suppose Nakamura prices its products at 25% above total production cost. An order came in from Mazda for 2,000 control units. Fujita estimates that filling the order will require Y5,500,000 of direct-materials cost and 1,500,000 of direct labor. It will require 60 hours of QC inspection time and will be shipped in 600 boxes. a. Compute the price charged for the 2,000 control units if Nakamura uses its traditional cost accounting system. b. Compute the price charged for the 2,000 control units if Nakamura uses the ABC system proposed by Ms. Fujita. 4. Explain why costs are different in the two costing systems. Include an indication of which costs you think are most accurate and why. 1 Data Table X Direct materials 50,000 Direct labor 54,415 21,766 Indirect production costs Total cost 126,181 Print Done Data Table - X w Cost-Allocation Base Predicted 20X0 Cost (000) Direct materials cost Activity Receiving Assembly Quality control 3,500 Number of control units 10,560 QC hours 2. 176 5,530 Shipping Number of boxes shipped TOTAL 21.766 Print Done All After Ms. Fujita attended the seminar, she suggested that Nakamura experiment with an ABC system in the Automotive Controls Department. She identified four main activities that cause indirect production costs in the department and selected a cost driver to use as a cost-allocation base for each activity as follows: (Click the icon to view the ABC data.) In 20x0 the Automotive Controls Department expects to produce 96,000 control units, use 640 quality control hours, and ship 7,900 boxes. Rond the
