Question One: ABC Costing (22 Marks) Fine Paint Company manufactures two house paints: an oil-based paint and a water-based paint. The two paints involve different production technology but share the same processing equipment. To improve cost control and implement a better pricing strategy, the managerial accountant in the company, Alexander Wang, performed an ABC analysis for the two products. He identified the following four activity cost pools, their estimated total costs, cost drivers, and total level of activities in terms of cost drivers: Cost Pools Estimated Costs Activity Measure Activities for Activities for Oil-based Paint Water-based Paint Purchasing $240,000 Purchase orders 800 orders 700 orders Processing 1,400,000 Litres processed 400,000 litres 600,000 litres Packaging 580,000 Containers filled 180,000 containers 220,000 containers Testing 240,000 Number of tests 2.100 tests 1,900 tests During the year, 400,000 litres of oil-based paint and 600,000 litres of water-based paints are expected to be produced. For oil-based paint, the total direct material cost is $1,600,000 and total direct labour cost is $800,000; for water-based paint, the total direct material cost is $1,800,000 and total direct labour cost is $1,200,000. Required: a) Calculate the activity rate for each cost pool. (4 marks) b) Calculate the overhead costs assigned to each product, using ABC costing. (6 marks) c) Calculate the total product cost and product cost per litre for each product, using ABC costing. (8 marks) d) The company wants to make at least 30% product margin on sales from the oil-based paint, and at least 25% product margin on sales from the water-based paint. Please set the minimum selling price for each product using unit production cost calculated by ABC costing. (4 marks) Course Description: Managers require relevant information for planning, controlling and decision-making purposes. This course examines the accounting techniques available to satisfy those needs. Please I need a private tutor for this course, due to no class lectures, it is really hard for me to learn and understand this course. After answering the questions, please contact me @ tessymegan@yahoo.com. I can pay upto $4 per question and $1.50cad for questions with part A and B. please contact me asap. For the question above for example, I can pay $1.50cad + $1.50cad + $1.50cad + $1.50cad = $6cad in total. Btw, I can pay you for this question above. |