The company King Arthur Inc. uses Activity Based Costing (ABC) for its product calculation. In the...

 

Transcribed Image Text:

The company King Arthur Inc. uses Activity Based Costing (ABC) for its product calculation. In the tables below you will find information related to the four products Marcus, Matthew, Lucas and Brutus, for the budget year 2020. The company manufactures the products by carrying out a number of activities that can we can group in four different activity groups. Each of the activities in each group share the same cost driver type, but there are also facility-based costs without a known cost driver. Activity group Group 1 Group 2 Group 3 Group 4 Fixed indirect costs 2020 6 000 000 2 000 000 800 000 4 000 000 Available capacity Cost driver type in units Budgeted capacity utilization in units Volume-based Volume-based Product-based Series-based 20 000 10 000 4 000 8 000 16 000 8 000 3 000 6.000 Facility-based activities Total 5 000 000 17 800 000 Not available Direct cost Production Product per unit volume, units Budgeted in Group 1 Budgeted in Group 2 Budgeted in Budgeted in Group 3 Marcus 2 000 2 000 600 400 400 Group 4 1 200 Matthew 3.000 1 600 1 400 800 2 000 800 Lucas 4 000 1 200 4 000 200 2 000 8 000 Brutus Total 8 000 400 2 000 1 600 1600 6 000 8 000 3 000 6 000 16 000 Question 2 a) (10%) Present costing models for the four products where you include all costs that are relevant in an ABC- based costing model. Question 2 b) (5%) Calculate the costs for the excess capacity in 2020, specified for each activity group, based on the information above. Assume now that the company has the possibility to additionally deliver 800 units of product Matthew, increasing the production volume from 1 600 to 2 400 units. This additional order will increase the activity frequency in all of the four activity groups and that the budgeted activity will be as follows for product Matthew: Activity group 1: 2 100 Activity group 2: 1 200 Activity group 3: 3 000 Activity group 4: 1 200 Question 2 c) (10%) If King Arthur Inc. wants to have a profit contribution of 400 000 from this new order, what is the offered price per unit? Calculate also the change in costs of utilized capacity if this order is accepted. The company King Arthur Inc. uses Activity Based Costing (ABC) for its product calculation. In the tables below you will find information related to the four products Marcus, Matthew, Lucas and Brutus, for the budget year 2020. The company manufactures the products by carrying out a number of activities that can we can group in four different activity groups. Each of the activities in each group share the same cost driver type, but there are also facility-based costs without a known cost driver. Activity group Group 1 Group 2 Group 3 Group 4 Fixed indirect costs 2020 6 000 000 2 000 000 800 000 4 000 000 Available capacity Cost driver type in units Budgeted capacity utilization in units Volume-based Volume-based Product-based Series-based 20 000 10 000 4 000 8 000 16 000 8 000 3 000 6.000 Facility-based activities Total 5 000 000 17 800 000 Not available Direct cost Production Product per unit volume, units Budgeted in Group 1 Budgeted in Group 2 Budgeted in Budgeted in Group 3 Marcus 2 000 2 000 600 400 400 Group 4 1 200 Matthew 3.000 1 600 1 400 800 2 000 800 Lucas 4 000 1 200 4 000 200 2 000 8 000 Brutus Total 8 000 400 2 000 1 600 1600 6 000 8 000 3 000 6 000 16 000 Question 2 a) (10%) Present costing models for the four products where you include all costs that are relevant in an ABC- based costing model. Question 2 b) (5%) Calculate the costs for the excess capacity in 2020, specified for each activity group, based on the information above. Assume now that the company has the possibility to additionally deliver 800 units of product Matthew, increasing the production volume from 1 600 to 2 400 units. This additional order will increase the activity frequency in all of the four activity groups and that the budgeted activity will be as follows for product Matthew: Activity group 1: 2 100 Activity group 2: 1 200 Activity group 3: 3 000 Activity group 4: 1 200 Question 2 c) (10%) If King Arthur Inc. wants to have a profit contribution of 400 000 from this new order, what is the offered price per unit? Calculate also the change in costs of utilized capacity if this order is accepted.

Answer rating: 100% (QA)

Answer Question 2 a Present costing models for the four products using Activity Based Costing ABC To ... View the full answer