II. Wongtien Electronics Corp. in Hong Kong, SAR, China, manufactures tablets, laptops and desktop PCs. Wongtien currently operates a standard absorption costing system. Budgeted information for next year is given below (currency in one thousand Hong Kong Dollars, HK$000): Desktop PCs 9,880 2,200 800 Total 26,000 5,800 2,300 Products Sales revenue Tablets 3,640 Laptops 12,480 2,800 Direct material 800 wwm Direct labor 300 Fixed production 1,456 1,084 992 3.488 overheads 3,952 2,928 10,400 7,500 Gross profit Fixed production overheads are currently absorbed based on a percentage of sales revenue. Wongtien is considering changing to an activity-based costing system. The main activities and their associated cost drivers and overhead cost have been identified as follows: Cost driver Production overhead cost Activity Manufacturing scheduling wNumber of orders Parts handling Assembly Software installation and testing Packaging 162 Number of parts Assembly time Number of software applications Number of units 2,464 4,472 2,000 1,302 10,400 Further details have also been ascertained as follows: Desktop PCs 6,000 Tablets Laptops 12,000 Budgeted production for next year (units). 10,000 Average number of units per order Number of parts per unit Assembly time per unit (minutes). Number of software applications per unit. 10 6 4 20 35 25 20 40 30 3 4
II. Wongtien Electronics Corp. in Hong Kong, SAR, China, manufactures tablets, laptops and desktop PCs. Wongtien currently operates a standard absorption costing system. Budgeted information for next year is given below (currency in one thousand Hong Kong Dollars, HK$000): Desktop PCs 9,880 2,200 800 Total 26,000 5,800 2,300 Products Sales revenue Tablets 3,640 Laptops 12,480 2,800 Direct material 800 wwm Direct labor 300 Fixed production 1,456 1,084 992 3.488 overheads 3,952 2,928 10,400 7,500 Gross profit Fixed production overheads are currently absorbed based on a percentage of sales revenue. Wongtien is considering changing to an activity-based costing system. The main activities and their associated cost drivers and overhead cost have been identified as follows: Cost driver Production overhead cost Activity Manufacturing scheduling wNumber of orders Parts handling Assembly Software installation and testing Packaging 162 Number of parts Assembly time Number of software applications Number of units 2,464 4,472 2,000 1,302 10,400 Further details have also been ascertained as follows: Desktop PCs 6,000 Tablets Laptops 12,000 Budgeted production for next year (units). 10,000 Average number of units per order Number of parts per unit Assembly time per unit (minutes). Number of software applications per unit. 10 6 4 20 35 25 20 40 30 3 4
Chapter1: Financial Statements And Business Decisions
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