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Required a. Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines. . Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs Determine the combined cost of all three product lines.

Required a. Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines. . Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs Determine the combined cost of all three product lines.

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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Vishnu 

Academy Electronics produces video games in three market categories: commercial, home, and miniature. Academy has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers: Category Unit Batch Product Facility Total Pooled Cost $440,000 254,400 125,600 320,000 Types of Costs. Indirect labor wages, supplies, factory utilities, machine maintenance Materials handling, inventory storage, labor for setups, packaging, labeling and shipping, scheduling Research and development Rent, general utilities, maintenance, facility depreciation, admin. salaries Additional data for each of the product lines follow: Direct materials cost Direct labor cost Number of labor hours Number of machine hours. Number of production orders Research and development time Number of units Square footage Commercial $ 25.20/unit $ 11.00/hour 6,000 10,000 200 10% 15,000 20,000 Home $ 15.20/unit $9.00/hour 12,000 45,000 2,000 20% 45,000 50,000 Miniature $ 12.20/unit $ 10.00/hour 2,000 25,000 800 70% 14,000 30,000 Machine hours Number of production orders Time spent by research department Square footage Total 20,000 80,000 3,000 Cost Driver 100% 74,000 100,000 Required a. Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines. b. Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs. Determine the combined cost of all three product lines.
Transcribed Image Text:Academy Electronics produces video games in three market categories: commercial, home, and miniature. Academy has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC system, the company identified the following activity cost pools and cost drivers: Category Unit Batch Product Facility Total Pooled Cost $440,000 254,400 125,600 320,000 Types of Costs. Indirect labor wages, supplies, factory utilities, machine maintenance Materials handling, inventory storage, labor for setups, packaging, labeling and shipping, scheduling Research and development Rent, general utilities, maintenance, facility depreciation, admin. salaries Additional data for each of the product lines follow: Direct materials cost Direct labor cost Number of labor hours Number of machine hours. Number of production orders Research and development time Number of units Square footage Commercial $ 25.20/unit $ 11.00/hour 6,000 10,000 200 10% 15,000 20,000 Home $ 15.20/unit $9.00/hour 12,000 45,000 2,000 20% 45,000 50,000 Miniature $ 12.20/unit $ 10.00/hour 2,000 25,000 800 70% 14,000 30,000 Machine hours Number of production orders Time spent by research department Square footage Total 20,000 80,000 3,000 Cost Driver 100% 74,000 100,000 Required a. Determine the total cost and cost per unit for each product line, assuming that overhead costs are allocated to each product line using direct labor hours as a companywide allocation base. Also determine the combined cost of all three product lines. b. Determine the total cost and cost per unit for each product line, assuming that an ABC system is used to allocate overhead costs. Determine the combined cost of all three product lines.
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