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VisionTV produces two models of the 4K televisions: a 60 and a 80. VisionTV is currently using a traditional costing system but is considering
VisionTV produces two models of the 4K televisions: a 60" and a 80". VisionTV is currently using a traditional costing system but is considering implementing an activity-based costing system. Using the information provided below, the CFO of VisionTV has asked you to prepare a comparison of the total and per-unit manufacturing cost for each model TV under their current system and an ABC system. 60-inch TV Total DM cost $825,000 Total DL cost $260,000 Production volume 3,500 units 80-inch TV Total DM cost Total DL cost Production volume $1,466,000 $408,000 4,900 units Manufacturing overhead is based upon direct labour hours. Total manufacturing overhead is estimated to be $1,250,000 and direct labour hours are 33,000 (19,000 for the 60" TV and 14,000 for the 80" TV). Estimates for Activity-based costing are: Activity Activity Cost Pool Total Cost Total Driver Activity 60" TV 80" TV Materials handling $165,000 Number of material orders handled 625 475 225 Machine processing $575,000 Machine hours 50,000 25,000 25,000 Packaging $105,000 Packaging hours 15,000 3,200 6,400
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