WXY Services Ltd.

Scenario: Analyze Cost Allocation using ABC

Data:

• Cost Pools and Cost Drivers:
  • Activity 1: $50,000, Cost Driver Units: 5,000
  • Activity 2: $80,000, Cost Driver Units: 8,000
  • Activity 3: $30,000, Cost Driver Units: 3,000

Requirements:

1. Allocate costs to products A, B, and C based on activity-based costing.
2. Calculate the overhead rate for each activity.
3. Analyze the cost allocation and its impact on product profitability.
4. Discuss the benefits of using ABC for cost management.