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Tutorial Activity Based Costin Company XYZ has 2 fixed price contracts for 2 different clients. The company has enough capacity for both contracts but is
Tutorial Activity Based Costin Company XYZ has 2 fixed price contracts for 2 different clients. The company has enough capacity for both contracts but is uncertain whether they will be profitable. Data as follows: Customer AAA BBB Component Type A999 B999 Contract Value($) $27.000 $100.000 Contract Quantity 1,000 unit 2,000 units Material cost/unit $15 $20 Moulding time/ batch 5 hours 7.5 hours Batch Size 100 units 50 units Annual Budgeted overheads as follows: Activity Cost Driver Cost Driver Cost pool volume/year Moulding Moulding hours 2.000 $150.000 Inspection Batches 150 $75.000 Production Contracts 20 $125,000 Management Required: a) Calculate the activity based costs and profits for each contract. b) Calculate the profit for each job using Absorption costing. Absorb overheads using moulding hours
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