Pracitce Question for ABC
description
Transcript of Pracitce Question for ABC
Cabalmakesandsellstwoproducts,PlusandDoubleplus.Thedirectcostsofproductionare$12foroneunitofPlusand$24perunitofDoubleplus. Informationrelatingtoannualproductionandsalesisas follows:Plus DoubleplusAnnualproductionandsales 24,000units 24,000unitsDirectlabourhoursperunit 1.0 1.5Numberoforders 10 140Numberofbatches 12 240Numberofsetupsperbatch 1 3Specialpartsperunit 1 4Informationrelatingtoproductionoverheadcostsisasfollows:Cost driver Annual cost$Setupcosts Numberofsetups 73,200Specialpartshandling Numberofspecialparts 60,000Othermaterialshandling Numberofbatches 63,000Orderhandling Numberoforders 19,800Otheroverheads ---- 216,000 432,000Otheroverheadcostsdonothaveanidentifiablecostdriver,andinanABCsystem,theseoverheads wouldberecoveredonadirectlabourhoursbasis.(a) CalculatetheproductioncostperunitofPlusandofDoubleplusifthecompanyusestraditional absorptioncostingandtheoverheadsarerecoveredonadirectlabourhoursbasis.(b) CalculatetheproductioncostperunitofPlusandofDoubleplusifthecompanyusesABC.(c) Commentonthereasonsforthedifferencesintheproductioncostperunitbetweenthetwo methods.(d) WhataretheimplicationsformanagementofusinganABCsysteminsteadofanabsorptioncosting system?