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Wongtien Electronics Corp. in Hong Kong, SAR, China, manufactures tablets, laptops and desktop PCs. Wongtien currently operates a standard absorption costing system. Budgeted information for next year is given below (currency in one thousand Hong Kong Dollars, HK$000): Products Sales revenue Direct material Desktop PCs 9,880 2,200 Tablets Laptops 12,480 2,800 t200 Totale 3,640 800 26,000 5,800 2,300 Direct labor 300 800 Fixed production e 1,456 1,084 overheads 4.992 3.488 3,952 2,928 10,400- 7,500- Gross profit Fixed production overheads are currently absorbed based on a percentage of sales revenue. Wongtien is considering changing to an activity-based costing system. The main activities and their associated cost drivers and overhead cost have been identified as follows:e Activity Manufacturing scheduling Parts handling Assembly Software installation and testing Packaging Cost driver Number of orders Number of parts Assembly time Number of softwaree applications Number of units Production overhead cost 162e 2,464e 4,472e 2,000- 1,302 10,400- Further details have also been ascertained as follows: Laptops 12,000 6. Desktop PCs 6,000- Tablets Budgeted production for next year (units). 10,000 Average number of units per order Number of parts per unit Assembly time per unit (minutes)m 10 20 35 25e 20 40 30

Wongtien Electronics Corp. in Hong Kong, SAR, China, manufactures tablets, laptops and desktop PCs. Wongtien currently operates a standard absorption costing system. Budgeted information for next year is given below (currency in one thousand Hong Kong Dollars, HK$000): Products Sales revenue Direct material Desktop PCs 9,880 2,200 Tablets Laptops 12,480 2,800 t200 Totale 3,640 800 26,000 5,800 2,300 Direct labor 300 800 Fixed production e 1,456 1,084 overheads 4.992 3.488 3,952 2,928 10,400- 7,500- Gross profit Fixed production overheads are currently absorbed based on a percentage of sales revenue. Wongtien is considering changing to an activity-based costing system. The main activities and their associated cost drivers and overhead cost have been identified as follows:e Activity Manufacturing scheduling Parts handling Assembly Software installation and testing Packaging Cost driver Number of orders Number of parts Assembly time Number of softwaree applications Number of units Production overhead cost 162e 2,464e 4,472e 2,000- 1,302 10,400- Further details have also been ascertained as follows: Laptops 12,000 6. Desktop PCs 6,000- Tablets Budgeted production for next year (units). 10,000 Average number of units per order Number of parts per unit Assembly time per unit (minutes)m 10 20 35 25e 20 40 30

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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II. Wongtien Electronics Corp. in Hong Kong, SAR, China, manufactures tablets, laptops and desktop PCs. Wongtien currently operates a standard absorption costing system. Budgeted information for next year is given below (currency in one thousand Hong Kong Dollars, HK$000):- Desktop PCs 9,880 2,200 800 Products Sales revenue Tablets 3,640 800 Laptops 12,480 2,800 1.200 Total 26,000 5,800- 2,300 Direct material Direct labor 300 Fixed production e overheads 1,456 1,084 4.992 3.488 3,952 2,928 10,400 7,500- Gross profit Fixed production overheads are currently absorbed based on a percentage of sales revenue. Wongtien is considering changing to an activity-based costing system. The main activities and their associated cost drivers and overhead cost have been identified as follows: Activity Manufacturing scheduling mber of orders Parts handling Assembly Software installation and testing Packaging Cost driver Production overhead cost 162e Number of parts Assembly time Number of softwaree applications Number of units 2,464- 4,472- 2,000- 1,302 10,400- Further details have also been ascertained as follows: Laptops 12,000 Desktop PCse 6,000- Tablets Budgeted production for next year (units). 10,000 Average number of units per order Number of parts per unit Assembly time per unit (minutes) 10 6. 4 20 35 25- 20 40 30-
Transcribed Image Text:II. Wongtien Electronics Corp. in Hong Kong, SAR, China, manufactures tablets, laptops and desktop PCs. Wongtien currently operates a standard absorption costing system. Budgeted information for next year is given below (currency in one thousand Hong Kong Dollars, HK$000):- Desktop PCs 9,880 2,200 800 Products Sales revenue Tablets 3,640 800 Laptops 12,480 2,800 1.200 Total 26,000 5,800- 2,300 Direct material Direct labor 300 Fixed production e overheads 1,456 1,084 4.992 3.488 3,952 2,928 10,400 7,500- Gross profit Fixed production overheads are currently absorbed based on a percentage of sales revenue. Wongtien is considering changing to an activity-based costing system. The main activities and their associated cost drivers and overhead cost have been identified as follows: Activity Manufacturing scheduling mber of orders Parts handling Assembly Software installation and testing Packaging Cost driver Production overhead cost 162e Number of parts Assembly time Number of softwaree applications Number of units 2,464- 4,472- 2,000- 1,302 10,400- Further details have also been ascertained as follows: Laptops 12,000 Desktop PCse 6,000- Tablets Budgeted production for next year (units). 10,000 Average number of units per order Number of parts per unit Assembly time per unit (minutes) 10 6. 4 20 35 25- 20 40 30-
main activities and their associated cost drivers and overhead cost have been identified as follows: Activity Manufacturing scheduling Parts handling Assembly Software installation and testing Packaging Cost driver Number of orders Number of parts Assembly time Number of softwaree applications Number of units Production overhead cost- 162 2,464 4,472- 2,000- 1,302 10,400 Further details have also been ascertained as follows:e Desktop PCs 6,000- 4 25 Tablets Laptops 12,000 6. Budgeted production for next year (units). 10,000 Average number of units per order Number of parts per unit Assembly time per unit (minutes) Number of software applications per unit. 10 20 35 20 40 30 4 Instructionst 1. Calculate the total gross profit for each product using the proposed activity-based costing system. (25%)- 2. Discuss the differences between the gross profit figures calculated in part 1 compared with those calculated under the current absorption costing system. (15%)- 3. Explain how the information obtained from the activity-based costing system could be used for cost management purposes. (10%)-
Transcribed Image Text:main activities and their associated cost drivers and overhead cost have been identified as follows: Activity Manufacturing scheduling Parts handling Assembly Software installation and testing Packaging Cost driver Number of orders Number of parts Assembly time Number of softwaree applications Number of units Production overhead cost- 162 2,464 4,472- 2,000- 1,302 10,400 Further details have also been ascertained as follows:e Desktop PCs 6,000- 4 25 Tablets Laptops 12,000 6. Budgeted production for next year (units). 10,000 Average number of units per order Number of parts per unit Assembly time per unit (minutes) Number of software applications per unit. 10 20 35 20 40 30 4 Instructionst 1. Calculate the total gross profit for each product using the proposed activity-based costing system. (25%)- 2. Discuss the differences between the gross profit figures calculated in part 1 compared with those calculated under the current absorption costing system. (15%)- 3. Explain how the information obtained from the activity-based costing system could be used for cost management purposes. (10%)-
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