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TikTok Electronics manufactures an aluminium fibre tripod model "TRI-X" which sells for $1,600. The production cost computed per unit under traditional costing for each model in 2019 was as follows: Traditional Costing TRIX $700 $120 $228 $1, 048 Direct Materials Direct Labour ($20/hour) Manufacturing overhead ($38 per DLH) Total per unit cost In 2019, TikTok Electronics manufactured 26,000 units of TRI-X. Under traditional costing, the gross profit on TRI-X was $552 ($1,600-$1,048). Management is considering phasing out TRI-X as it has continuously failed to reach the gross profit target of $600. Before finalizing its decision, management asks TikTok Electronics management accountant to prepare an analysis usir based costing (ABC). The management accountant accumulates the following information about overhead for the year ended December 31, 2019. ctivity- Activity Cost Pools Cost Drivers Estimated Expected Use of Overhead Cost Drivers Purchasing Number of $1,200,000 40,000 orders Machine setups Number of 900,000 18,000 setups Machine hours Machining Quality Control 4,800,000 120,000 Number of 700,000 28,000 inspections The cost drivers used: Cost Drivers TRI-X Product Purchase orders 17,000 Machine setups 5,000 Machine hours 75,000 Inspections 11,000 Required: 1. Calculate the activity rates for each of the overhead items using the four cost drivers. 2. Using the rates in (1) determine the unit cost for TRI-X. 3. Calculate the gross profit of each model of TRI-X based on ABC costings and recommend whether or not TRI-X should be discontinued.

TikTok Electronics manufactures an aluminium fibre tripod model "TRI-X" which sells for $1,600. The production cost computed per unit under traditional costing for each model in 2019 was as follows: Traditional Costing TRIX $700 $120 $228 $1, 048 Direct Materials Direct Labour ($20/hour) Manufacturing overhead ($38 per DLH) Total per unit cost In 2019, TikTok Electronics manufactured 26,000 units of TRI-X. Under traditional costing, the gross profit on TRI-X was $552 ($1,600-$1,048). Management is considering phasing out TRI-X as it has continuously failed to reach the gross profit target of $600. Before finalizing its decision, management asks TikTok Electronics management accountant to prepare an analysis usir based costing (ABC). The management accountant accumulates the following information about overhead for the year ended December 31, 2019. ctivity- Activity Cost Pools Cost Drivers Estimated Expected Use of Overhead Cost Drivers Purchasing Number of $1,200,000 40,000 orders Machine setups Number of 900,000 18,000 setups Machine hours Machining Quality Control 4,800,000 120,000 Number of 700,000 28,000 inspections The cost drivers used: Cost Drivers TRI-X Product Purchase orders 17,000 Machine setups 5,000 Machine hours 75,000 Inspections 11,000 Required: 1. Calculate the activity rates for each of the overhead items using the four cost drivers. 2. Using the rates in (1) determine the unit cost for TRI-X. 3. Calculate the gross profit of each model of TRI-X based on ABC costings and recommend whether or not TRI-X should be discontinued.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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TikTok Electronics manufactures an aluminium fibre tripod model "TRI-X" which sells for $1,600. The production cost computed per unit under traditional costing for each model in 2019 was as follows: Traditional Costing TRIX $700 $120 $228 $1, 048 Direct Materials Direct Labour ($20/hour) Manufacturing overhead ($38 per DLH) Total per unit cost In 2019, TikTok Electronics manufactured 26,000 units of TRI-X. Under traditional costing, the gross profit on TRI-X was $552 ($1,600-$1,048). Management is considering phasing out TRI-X as it has continuously failed to reach the gross profit target of $600. Before finalizing its decision, anagement asks TikTok Electronics manag based costing (ABC). The management accountant accumulates the following information about overhead for the year ended December 31, 2019. ent accountant to prepare an analysis using activity- Activity Cost Cost Drivers Estimated Expected Use of Pools Overhead Cost Drivers Purchasing Number of $1,200,000 40,000 orders Machine setups Number of 900,000 18,000 setups Machine hours Machining Quality Control 120,000 4,800,000 700,000 Number of 28,000 inspections The cost drivers used: Cost Drivers TRI-X Product Purchase orders 17,000 Machine setups 5,000 Machine hours 75,000 Inspections 11,000 Required: 1. Calculate the activity rates for each of the overhead items using the four cost drivers. 2. Using the rates in (1) determine the unit cost for TRI-X. 3. Calculate the gross profit of each model of TRI-X based on ABC costings and recommend whether or not TRI-X should be discontinued.
Transcribed Image Text:TikTok Electronics manufactures an aluminium fibre tripod model "TRI-X" which sells for $1,600. The production cost computed per unit under traditional costing for each model in 2019 was as follows: Traditional Costing TRIX $700 $120 $228 $1, 048 Direct Materials Direct Labour ($20/hour) Manufacturing overhead ($38 per DLH) Total per unit cost In 2019, TikTok Electronics manufactured 26,000 units of TRI-X. Under traditional costing, the gross profit on TRI-X was $552 ($1,600-$1,048). Management is considering phasing out TRI-X as it has continuously failed to reach the gross profit target of $600. Before finalizing its decision, anagement asks TikTok Electronics manag based costing (ABC). The management accountant accumulates the following information about overhead for the year ended December 31, 2019. ent accountant to prepare an analysis using activity- Activity Cost Cost Drivers Estimated Expected Use of Pools Overhead Cost Drivers Purchasing Number of $1,200,000 40,000 orders Machine setups Number of 900,000 18,000 setups Machine hours Machining Quality Control 120,000 4,800,000 700,000 Number of 28,000 inspections The cost drivers used: Cost Drivers TRI-X Product Purchase orders 17,000 Machine setups 5,000 Machine hours 75,000 Inspections 11,000 Required: 1. Calculate the activity rates for each of the overhead items using the four cost drivers. 2. Using the rates in (1) determine the unit cost for TRI-X. 3. Calculate the gross profit of each model of TRI-X based on ABC costings and recommend whether or not TRI-X should be discontinued.
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