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ABC Company makes products A and B. It uses an ABC system with two cost pools. Cost Pool "Labor- related" "Production setups" $15,000 $17,000 Total cost in cost pool $20,000 $12,000 $18,000 Activity level (# cost driver units) not enough information A B Compute allocated fixed costs for product A. 4,000 DL$ DL$ 2,000 Total 6,000 DL$ 600 600 1,200 setups setups setups

ABC Company makes products A and B. It uses an ABC system with two cost pools. Cost Pool "Labor- related" "Production setups" $15,000 $17,000 Total cost in cost pool $20,000 $12,000 $18,000 Activity level (# cost driver units) not enough information A B Compute allocated fixed costs for product A. 4,000 DL$ DL$ 2,000 Total 6,000 DL$ 600 600 1,200 setups setups setups

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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**ABC Company Cost Allocation Analysis** ABC Company manufactures products A and B. The company utilizes an Activity-Based Costing (ABC) system with two cost pools for allocating costs. ### Cost Pool and Activity Levels #### Table Overview The table displays two primary cost pools: "Labor-related" and "Production setups." It outlines the total cost in each pool, as well as the activity levels (measured in cost driver units) for products A and B. | Cost Pool | Total Cost in Cost Pool | Activity Level (# cost driver units) | | | | |----------------------|-------------------------|--------------------------------------|---|---|---| | | | A | B | Total | | | "Labor-related" | $12,000 | 4,000 DL$ | 2,000 DL$ | 6,000 DL$ | | "Production setups" | $18,000 | 600 setups | 600 setups | 1,200 setups | - **"Labor-related" Cost Pool**: - Total cost: $12,000 - Activity level: - Product A: 4,000 DL$ - Product B: 2,000 DL$ - Total: 6,000 DL$ - **"Production setups" Cost Pool**: - Total cost: $18,000 - Activity level: - Product A: 600 setups - Product B: 600 setups - Total: 1,200 setups ### Task: Compute Allocated Fixed Costs for Product A To calculate the allocated fixed costs for Product A, determine the allocation of each cost pool based on the activity levels specified. - **Options for the Allocated Fixed Costs for Product A**: - $15,000 - $17,000 - $20,000 - Not enough information - $30,000 This section provides an analytical framework for understanding how costs are distributed in an ABC system based on activity levels for multiple products.
Transcribed Image Text:**ABC Company Cost Allocation Analysis** ABC Company manufactures products A and B. The company utilizes an Activity-Based Costing (ABC) system with two cost pools for allocating costs. ### Cost Pool and Activity Levels #### Table Overview The table displays two primary cost pools: "Labor-related" and "Production setups." It outlines the total cost in each pool, as well as the activity levels (measured in cost driver units) for products A and B. | Cost Pool | Total Cost in Cost Pool | Activity Level (# cost driver units) | | | | |----------------------|-------------------------|--------------------------------------|---|---|---| | | | A | B | Total | | | "Labor-related" | $12,000 | 4,000 DL$ | 2,000 DL$ | 6,000 DL$ | | "Production setups" | $18,000 | 600 setups | 600 setups | 1,200 setups | - **"Labor-related" Cost Pool**: - Total cost: $12,000 - Activity level: - Product A: 4,000 DL$ - Product B: 2,000 DL$ - Total: 6,000 DL$ - **"Production setups" Cost Pool**: - Total cost: $18,000 - Activity level: - Product A: 600 setups - Product B: 600 setups - Total: 1,200 setups ### Task: Compute Allocated Fixed Costs for Product A To calculate the allocated fixed costs for Product A, determine the allocation of each cost pool based on the activity levels specified. - **Options for the Allocated Fixed Costs for Product A**: - $15,000 - $17,000 - $20,000 - Not enough information - $30,000 This section provides an analytical framework for understanding how costs are distributed in an ABC system based on activity levels for multiple products.
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