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Your company wants to do a comparison between the current traditional costing system and the newly developed ABC system. 200 units were completed during the
Your company wants to do a comparison between the current traditional costing system and the newly developed ABC system. 200 units were completed during the month. Associated costs for the month are: Direct material, $21,500; Average direct labor cost, $15/hour; Direct labor hours, 215; Overhead allocation is 175% of direct labor costs. | ||||||||
Complete the cost comparsion between ABC and Traditional Costing for the order. Calculate the Activity Costs per Unit. | ||||||||
Activity | Cost Driver | Activity Amount | Activity Rate | |||||
Design | Design Hours | 25 hours | $60 | per hour | ||||
Setup | Number of Setups | 6 setups | $40 | per setup | ||||
Production | Equipment Hours | 45 hours | $125 | per hour | ||||
Assembly | Direct Labor Hours | 20 hours | $40 | per hour | ||||
Shipping/Packaging | Direct Labor Hours | 30 hours | $25 | per hour | ||||
Calculations: | Fill-in the labels and calculations in the table below | |||||||
Traditional Costing: | ||||||||
Total Cost | Overhead Allocation Rate | |||||||
ABC Costing | ||||||||
Total Activity Costs for Job | ||||||||
Activity Costs per Unit | ||||||||
ABC Total Costs | ||||||||
Total Activity Costs | ||||||||
Total Cost (ABC) | Overhead Allocation Rate | |||||||
In 1 -2 paragraphs below, analyze the difference between ABC & Traditional Costing. What potential benefit does this reflect of ABC? | ||||||||
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