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Direct material Machine-hours Units Setup-hours Orders $ 30,000 1,430 800 25.0 $ 43,000 1,900 1,000 40.0 e plant controller has a completed a tentative design for an ABC system to replace the current cost system. The system has five tivities. Data on the activities and the annual volume for each of the cost drivers follow: Cost Driver Material cost Machine-hours Units Orders Setup-hours $ 65,000 3,500 2,000 23.0 2 Activity Materials handling Machining Finishing Shipping Setups quired: What is the unit cost for each of the three jobs assuming Montana Precision Products continues to use its current costing system? Note: Round your final answers to 2 decimal places. What is the unit cost for each of the three jobs assuming Montana Precision Products adopts the ABC system as designed by the plant controller? Note: Do not round intermediate calculations. Round your final answers to 2 decimal places. Job 1004 Annual Cost Driver Volume $ 3,432,000 184,000 115,000 700 1,200 Unit Cost Job 1005 Job 1008

Direct material Machine-hours Units Setup-hours Orders $ 30,000 1,430 800 25.0 $ 43,000 1,900 1,000 40.0 e plant controller has a completed a tentative design for an ABC system to replace the current cost system. The system has five tivities. Data on the activities and the annual volume for each of the cost drivers follow: Cost Driver Material cost Machine-hours Units Orders Setup-hours $ 65,000 3,500 2,000 23.0 2 Activity Materials handling Machining Finishing Shipping Setups quired: What is the unit cost for each of the three jobs assuming Montana Precision Products continues to use its current costing system? Note: Round your final answers to 2 decimal places. What is the unit cost for each of the three jobs assuming Montana Precision Products adopts the ABC system as designed by the plant controller? Note: Do not round intermediate calculations. Round your final answers to 2 decimal places. Job 1004 Annual Cost Driver Volume $ 3,432,000 184,000 115,000 700 1,200 Unit Cost Job 1005 Job 1008

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Direct material Machine-hours Units Setup-hours. Orders Activity Materials handling Machining. $ 30,000 1,430 Finishing Shipping Setups 800 25.0 2 The plant controller has a completed a tentative design for an ABC system to replace the current cost system. The system has five activities. Data on the activities and the annual volume for each of the cost drivers follow: $ 43,000 1,900 1,000 40.0 4 a. Using the current costing system b. Using the ABC system Cost Driver Material cost Machine-hours Units Orders Setup-hours $ 65,000 3,500 2,000 23.0 2 Required: a. What is the unit cost for each of the three jobs assuming Montana Precision Products continues to use its current costing system? Note: Round your final answers to 2 decimal places. b. What is the unit cost for each of the three jobs assuming Montana Precision Products adopts the ABC system as designed by the plant controller? Note: Do not round intermediate calculations. Round your final answers to 2 decimal places. Job 1004 Annual Cost Driver Volume $ 3,432,000 184,000 115,000 700 1,200 Unit Cost Job 1005 Job 1008
Transcribed Image Text:Direct material Machine-hours Units Setup-hours. Orders Activity Materials handling Machining. $ 30,000 1,430 Finishing Shipping Setups 800 25.0 2 The plant controller has a completed a tentative design for an ABC system to replace the current cost system. The system has five activities. Data on the activities and the annual volume for each of the cost drivers follow: $ 43,000 1,900 1,000 40.0 4 a. Using the current costing system b. Using the ABC system Cost Driver Material cost Machine-hours Units Orders Setup-hours $ 65,000 3,500 2,000 23.0 2 Required: a. What is the unit cost for each of the three jobs assuming Montana Precision Products continues to use its current costing system? Note: Round your final answers to 2 decimal places. b. What is the unit cost for each of the three jobs assuming Montana Precision Products adopts the ABC system as designed by the plant controller? Note: Do not round intermediate calculations. Round your final answers to 2 decimal places. Job 1004 Annual Cost Driver Volume $ 3,432,000 184,000 115,000 700 1,200 Unit Cost Job 1005 Job 1008
Montana Precision Products (MPP) produces parts for small machine tools. The typical product goes through two processes, machining and finishing, before being packaged and shipped to the customer. All jobs at MMP are produced to order, and the company holds no finished goods inventory or work-in-process inventory. The company uses a traditional cost system and applies overhead to jobs based on machine-hours. The plant manager and the plant controller have been discussing activity-based costing and the benefits of using it. The controller's staff have been collecting data on the plant costs and activities. Following are estimates of representative annual costs: Overhead Category Materials handling Machining Finishing Shipping Setups Total The plant manager and the plant controller decide to look at the difference in the unit costs using the two cost systems, by computing costs for three representative jobs completed in October. Data on those jobs follow: Direct material Machine-hours Units: Setup-hours Orders Annual Cost $ 1,716,000 3,450,000 1,150,000 840,000 204,000 $ 7,360,000 Activity Materials handling Machining Finishing Shipping. Setups Job 10041 $ 30,000 1,430 800 25.0 2 Job 1005 $ 43,000 1,900 1,000 40.0 The plant controller has a completed a tentative design for an ABC system to replace the current cost system. The system has five activities. Data on the activities and the annual volume for each of the cost drivers follow: Cost Driver Material cost Machine-hours Units Orders Setup-hours Job 1008 $ 65,000 3,500 2,000 23.0 2 Annual Cost Driver Volume $ 3,432,000 184,000 115,000 700 1,200
Transcribed Image Text:Montana Precision Products (MPP) produces parts for small machine tools. The typical product goes through two processes, machining and finishing, before being packaged and shipped to the customer. All jobs at MMP are produced to order, and the company holds no finished goods inventory or work-in-process inventory. The company uses a traditional cost system and applies overhead to jobs based on machine-hours. The plant manager and the plant controller have been discussing activity-based costing and the benefits of using it. The controller's staff have been collecting data on the plant costs and activities. Following are estimates of representative annual costs: Overhead Category Materials handling Machining Finishing Shipping Setups Total The plant manager and the plant controller decide to look at the difference in the unit costs using the two cost systems, by computing costs for three representative jobs completed in October. Data on those jobs follow: Direct material Machine-hours Units: Setup-hours Orders Annual Cost $ 1,716,000 3,450,000 1,150,000 840,000 204,000 $ 7,360,000 Activity Materials handling Machining Finishing Shipping. Setups Job 10041 $ 30,000 1,430 800 25.0 2 Job 1005 $ 43,000 1,900 1,000 40.0 The plant controller has a completed a tentative design for an ABC system to replace the current cost system. The system has five activities. Data on the activities and the annual volume for each of the cost drivers follow: Cost Driver Material cost Machine-hours Units Orders Setup-hours Job 1008 $ 65,000 3,500 2,000 23.0 2 Annual Cost Driver Volume $ 3,432,000 184,000 115,000 700 1,200
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