P5-3A. Traditional Product Costing Versus Activity-Based Costing Assume that Panasonic Company has determined its estimated total manufacturing overhead cost for one of its plants to be $204,000, consisting of the following activity cost pools for the current month: Activity Centers Activity Costs Cost Drivers Activity Level $ 45,000 Setup hours. Number of moves..... Assembly hours... $1,500 Assembly setups. Materials handling... Assembly... 15,000 300 120,000 12,000 Maintenance.. Maintenance hours..... 24,000 $204,000 1,200 Total.... Total direct labor hours used during the two month were 8,000. Panasonic produces many different electronic products, including the following two products produced during the current month: Model X301 Model Z205 Units produced. 1,000 $15,000 $12,500 1,000 $15,000 $12,500 Direct materials costs.. Direct labor costs. Direct labor hours. 500 500 Setup hours.. Materials moves.. 50 100 25 50 Assembly hours. Maintenance hours.. 800 800 10 40 Required a. Calculate the total per-unit cost of each model using direct labor hours to assign manufacturing overhead to products. b. Calculate the total per-unit cost of each model using activity-based costing to assign manufacturing overhead to products. c. Comment on the accuracy of the two methods for determining product costs.
P5-3A. Traditional Product Costing Versus Activity-Based Costing Assume that Panasonic Company has determined its estimated total manufacturing overhead cost for one of its plants to be $204,000, consisting of the following activity cost pools for the current month: Activity Centers Activity Costs Cost Drivers Activity Level $ 45,000 Setup hours. Number of moves..... Assembly hours... $1,500 Assembly setups. Materials handling... Assembly... 15,000 300 120,000 12,000 Maintenance.. Maintenance hours..... 24,000 $204,000 1,200 Total.... Total direct labor hours used during the two month were 8,000. Panasonic produces many different electronic products, including the following two products produced during the current month: Model X301 Model Z205 Units produced. 1,000 $15,000 $12,500 1,000 $15,000 $12,500 Direct materials costs.. Direct labor costs. Direct labor hours. 500 500 Setup hours.. Materials moves.. 50 100 25 50 Assembly hours. Maintenance hours.. 800 800 10 40 Required a. Calculate the total per-unit cost of each model using direct labor hours to assign manufacturing overhead to products. b. Calculate the total per-unit cost of each model using activity-based costing to assign manufacturing overhead to products. c. Comment on the accuracy of the two methods for determining product costs.
Chapter1: Financial Statements And Business Decisions
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text:P5-3A. Traditional Product Costing Versus Activity-Based Costing
Assume that Panasonic Company has determined its estimated total manufacturing overhead
cost for one of its plants to be $204,000, consisting of the following activity cost pools for the
current month:
Activity Centers
Activity Costs
Cost Drivers
Activity Level
$ 45,000
15,000
$1,500
Assembly setups.
Materials handling..
Setup hours....
Number of moves.....
300
Assembly..
Maintenance.
120,000
24,000
$204,000
Assembly hours...
12,000
Maintenance hours....
1,200
Total.....
Total direct labor hours used during the two month were 8,000. Panasonic produces many
different electronic products, including the following two products produced during the current
month:
Model X301
Model Z205
Units produced..
1,000
$15,000
$12,500
1,000
$15,000
$12,500
Direct materials costs..
Direct labor costs..
Direct labor hours..
500
500
Setup hours..
50
100
Materials moves.
25
50
Assembly hours.
Maintenance hours...
800
800
10
| 40
Required
a. Calculate the total per-unit cost of each model using direct labor hours to assign
manufacturing overhead to products.
b. Calculate the total per-unit cost of each model using activity-based costing to assign
manufacturing overhead to products.
c. Comment on the accuracy of the two methods for determining product costs.
d. Discuss some of the strategic implications of your answers to the previous requirements.
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