The following example illustrates how traditional cost accounting techniques could result in a misleading and inequitable division of costs between low-volume and high-volume products, and demonstrates that ABC may provide a more meaningful allocation of costs. Suppose that Cooplan manufactures four products, W, X, Y and Z. The direct labour cost per hour is $5. Other output and cost data for the period just ended are as follows. Number of Material cost Direct labour Machine production runs in the period Output units per unit $ hours per unit hours per unit W 10 20 1 1 10 80 3 3 Y 100 20 1 1 Z 100 80 3 3 Overhead costs $ Expediting and scheduling costs Materials handling costs 9,100 7,700 Short-run variable costs 3,080 10,920 Set-up costs Required Prepare unit costs for each product using traditional costing and ABC. 22554
The following example illustrates how traditional cost accounting techniques could result in a misleading and inequitable division of costs between low-volume and high-volume products, and demonstrates that ABC may provide a more meaningful allocation of costs. Suppose that Cooplan manufactures four products, W, X, Y and Z. The direct labour cost per hour is $5. Other output and cost data for the period just ended are as follows. Number of Material cost Direct labour Machine production runs in the period Output units per unit $ hours per unit hours per unit W 10 20 1 1 10 80 3 3 Y 100 20 1 1 Z 100 80 3 3 Overhead costs $ Expediting and scheduling costs Materials handling costs 9,100 7,700 Short-run variable costs 3,080 10,920 Set-up costs Required Prepare unit costs for each product using traditional costing and ABC. 22554
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![The following example illustrates how traditional cost accounting techniques could result in a misleading
and inequitable division of costs between low-volume and high-volume products, and demonstrates that
ABC may provide a more meaningful allocation of costs.
Suppose that Cooplan manufactures four products, W, X, Y and Z. The direct labour cost per hour is $5.
Other output and cost data for the period just ended are as follows.
Number of
production runs
in the period
Material cost
Direct labour
Machine
per unit
$4
Output units
hours per unit
hours per unit
W
10
2
20
1
1
10
2
80
3
Y
100
5
20
1
1
100
5
80
3
14
Overhead costs
24
Expediting and scheduling costs
Materials handling costs
9,100
7,700
Short-run variable costs
3,080
10,920
Set-up costs
Required
Prepare unit costs for each product using traditional costing and ABC.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8c35567e-5a8e-4edb-8a66-66d161b7f95c%2F8f5f9160-8ce7-4f12-8a83-57c7892e84ac%2Fijxiwwj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The following example illustrates how traditional cost accounting techniques could result in a misleading
and inequitable division of costs between low-volume and high-volume products, and demonstrates that
ABC may provide a more meaningful allocation of costs.
Suppose that Cooplan manufactures four products, W, X, Y and Z. The direct labour cost per hour is $5.
Other output and cost data for the period just ended are as follows.
Number of
production runs
in the period
Material cost
Direct labour
Machine
per unit
$4
Output units
hours per unit
hours per unit
W
10
2
20
1
1
10
2
80
3
Y
100
5
20
1
1
100
5
80
3
14
Overhead costs
24
Expediting and scheduling costs
Materials handling costs
9,100
7,700
Short-run variable costs
3,080
10,920
Set-up costs
Required
Prepare unit costs for each product using traditional costing and ABC.
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