XYZ Motors Corporation has identified activity centers to which overhead costs are assigned. The cost pool amounts for these centers and their selected cost drivers for 2018 are as follows: Activity Center - Utilities: Cost - P600,000 Cost Driver - 30,000 machine hours Activity Center - Scheduling sand setups Cost - P546,000 Cost Driver - 390 setups Activity Center - Material handling Cost - P1,280,000 Cost Driver - 800,000 kilos of materials The company's products and other operating statistics are as follows: Product A: Direct costs - P40,000 Machine hours - 15,000 Number of setups - 65 Kilos of material - 250,000 Number of units produced - 20,000 Direct labor hours - 16,000 Product B: Direct costs - P40,000 Machine hours - 5,000 Number of setups - 190 Kilos of material - 150,000 Number of units produced - 10,000 Direct labor hours - 9,000 Product C: Direct costs - P45,000 Machine hours - 10,000 Number of setups - 135 Kilos of material - 400,000 Number of units produced - 30,000 Direct labor hours - 25,000 The company sets selling prices at cost plus a 20% markup. A. What is the unit cost of Product A using the appropriate cost drivers? B. Using the above data, assuming that the company before installing ABC system, used a traditional costing system that allocated manufacturing overhead to products using direct labor hours, what is the unit selling price of Product B?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
XYZ Motors Corporation has identified activity centers to which
Activity Center - Utilities:
Cost - P600,000
Cost Driver - 30,000 machine hours
Activity Center - Scheduling sand setups
Cost - P546,000
Cost Driver - 390 setups
Activity Center - Material handling
Cost - P1,280,000
Cost Driver - 800,000 kilos of materials
The company's products and other operating statistics are as follows:
Product A:
Direct costs - P40,000
Machine hours - 15,000
Number of setups - 65
Kilos of material - 250,000
Number of units produced - 20,000
Direct labor hours - 16,000
Product B:
Direct costs - P40,000
Machine hours - 5,000
Number of setups - 190
Kilos of material - 150,000
Number of units produced - 10,000
Direct labor hours - 9,000
Product C:
Direct costs - P45,000
Machine hours - 10,000
Number of setups - 135
Kilos of material - 400,000
Number of units produced - 30,000
Direct labor hours - 25,000
The company sets selling prices at cost plus a 20% markup.
A. What is the unit cost of Product A using the appropriate cost drivers?
B. Using the above data, assuming that the company before installing ABC system, used a traditional costing system that allocated manufacturing overhead to products using direct labor hours, what is the unit selling price of Product B?
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