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Schtt-die-Brh-noh (SDBN), a German wine glass manufacturing company, produces two product lines of wine glasses. The basic line Ortswein is essentially aimed at normal customers
Schtt-die-Brh-noh (SDBN), a German wine glass manufacturing company, produces two product lines of wine glasses. The basic line "Ortswein" is essentially aimed at normal customers who drink their daily glass of wine at home and appreciate a reasonably priced product. The premium line "Groes Gewchs" is aimed at the upscale wine drinker who appreciates the very high quality of the glass and is therefore willing to pay significantly higher prices. The two lines are produced on the same machines with batches of 700 Glasses per batch. The differences in the end products are achieved through different settings and raw materials. Due to the higher quality requirements, the "Groes Gewchs" wine glasses require more time for the quality inspection conducted by several inspectors. The daily production data is as follows: Required: a. Calculate the quality inspection cost per batch of glasses using traditional absorption costing with number of machine hours as the allocation base. b. Calculate the quality inspection cost per batch of glasses using activity-based costing. Assume quality inspection time is the cost driver. c. Which of the methods used in (a) and (b) should SDBN use for pricing considerations \& calculations? What would be your recommendation and why
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