The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below. Activity Cost Pool Machine setups Purchase orders General factory Estimated Overhead Costs $ 13,630 85,750 67,760 $167,140 Expected Activity Product C 130 750 4,000 Product D 160 1,000 2,160 Total 290 1,750 6,160 Determine the unit product cost of each product for the current period using the activity-based costing approach. Which cost method would you use to manage this business and why?
The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below. Activity Cost Pool Machine setups Purchase orders General factory Estimated Overhead Costs $ 13,630 85,750 67,760 $167,140 Expected Activity Product C 130 750 4,000 Product D 160 1,000 2,160 Total 290 1,750 6,160 Determine the unit product cost of each product for the current period using the activity-based costing approach. Which cost method would you use to manage this business and why?
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter3: Cost Behavior And Cost Forecasting
Section: Chapter Questions
Problem 61P: Method of Least Squares, Predicting Cost for Different Time Periods from the One Used to Develop a...
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Transcribed Image Text:The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead
of its traditional system based on direct labor hours. The activity-based costing system would use three activity cost pools. Data relating
to these activities for the current period are given below.
Activity
Overhead Expected Activity
Costs
Product C
Im
Machine setups $ 13,630
130
Purchase orders 85,750
750
67,760
4,000
Cost Pool
Estimated
General factory
$167,140
Product D Total
160
1,000
2,160
290
1,750
6,160
Determine the unit product cost of each product for the current period using the activity-based costing approach.
Which cost method would you use to manage this business and why?
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