Task 2:

Wonder Worlds produces two types of watches: digital and analog. The company manufactures 12,000 digital watches and 17,000 analog watches. Its activity-based costing system uses two indirect cost pools. One cost pool is for setup costs and the other is for general manufacturing overhead. Wonder Worlds allocates setup costs to the two watches based on setup labor-hours and general manufacturing overhead costs on the basis of direct manufacturing labor-hours. It provides the following budgeted cost information:

Total

$74,750

1. Calculate the total budgeted costs of the digital and analog watches using ABC system.

2. How many steps are there in ABC implementation system? Describe the steps in your own words.

3. What is the main difference between ABC system and Simple costing system?

4. In your own words, describe the batch-level costs in the cost hierarchy.

Task 2: Wonder Worlds produces two types of watches: digital and analog. The company manufactures 12,000 digital watches and 17,000 analog watches. Its activity-based costing system uses two indirect cost pools. One cost pool is for setup costs and the other is for general manufacturing overhead. Wonder Worlds allocates setup costs to the two watches based on setup labor-hours and general manufacturing overhead costs on the basis of direct manufacturing labor-hours. It provides the following budgeted cost information: Digital Watches Analog Watches Total Direct materials per $25 $19 watch Direct manufacturing 0.6 hours 1.1 hours labor-hours per watch Direct manufacturing $10 $10 labor rate per hour Setup costs $74,750 Watches produced per 80 68 batch Setup hours per batch 0.5 1 General $181,300 manufacturing overhead costs 1. Calculate the total budgeted costs of the digital and analog watches using ABC system. 2. How many steps are there in ABC implementation system? Describe the steps in your own words. 3. What is the main difference between ABC system and Simple costing system? 4. In your own words, describe the "batch-level costs" in the cost hierarchy