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Please Explain Answers 7.42 ABC Costs, Uncertainties, ABM, Non-Value-Added Activities The Pond Kit Company manufactures kits for fish ponds. The managers recently set up an
Please Explain Answers
7.42 ABC Costs, Uncertainties, ABM, Non-Value-Added Activities The Pond Kit Company manufactures kits for fish ponds. The managers recently set up an ABC 03 04 system to identify and reduce non-value-added activitics. The ABC system includes the following cost pools, cost drivers, and estimated costs for manufacturing activities: Cost Allocation Rate S1.00 per part 40.00 per hour 50.00 per batch 1.30 per kg 10.00 per kit 20.00 per kit 100.00 per kit Cost Driver Activity Material handling Number of parts Forming Moulding setup Packing and shipping Weight Inspection Direct labour Direct materials Moulding hours Number of batches Finished kits Finished kits Finished kits The company manufactures 10 kits per batch. Each kit requires 20 parts and two hours in moulding, and cach weighs 30 kg. REQUIRED A. Calculate the total ABC manufacturing cost per batch. B. Calculate the total ABC cost per finished kit. C. Suppose that Pond Kit's managers also want to allocate marketing costs and customer service to each product. Total marketing costs for the period were S15,000, and customer service costs were $25,000. The number of batches produced was 1,000. Calculate the total ABC cost per unit and cost per kit, including the costs of marketing and customer services. D. Are the activities listed likely to be the only possible set of activities for Pond Kit Company? Why or why not? E. Describe how the managers and accountants of Pond Kit Company might use this new ABC system to identify non-value-added activitiesStep by Step Solution
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