Zhedong Electronics Company in Hangzhou, China, plans to use activity-based costing to determine its product costs. It presently uses a single plantwide factory overhead rate for allocating factory overhead to products, based on direct labor hours. The total factory overhead cost is as follows (currency unit in Chinese RMB, \): Department Factory Overhead Production Support Production (factory overhead only) Total cost ¥1,225,000 175,000 ¥1,400,000 The company determined that it performed four major activities in the Production Support Department. The budgeted activity costs are as follows: Production Support Department Budgeted Activity Cost * 428,750 245,000 183,750 367,500 ¥1,225,000 Setup Production control Quality control Materials management Total Zhedong estimated the following activity-base usage and units produced for each of its thi products: Number of Direct Production Material Products Units Labor Hrs. Setups Orders Inspections Requisition LCD TV... 10,000 25,000 80 80 35 320 Tablet.... 2,000 10,000 40 40 40 400 Smartphone. 50,000 140,000 175,000 30 Total cost 62,000 125 125 75 750 Instructions 1. Which method provides more accurate product costing? Why?

Zhedong Electronics Company in Hangzhou, China, plans to use activity-based costing to determine its product costs. It presently uses a single plantwide factory overhead rate for allocating factory overhead to products, based on direct labor hours. The total factory overhead cost is as follows (currency unit in Chinese RMB, \): Department Factory Overhead Production Support Production (factory overhead only) Total cost ¥1,225,000 175,000 ¥1,400,000 The company determined that it performed four major activities in the Production Support Department. The budgeted activity costs are as follows: Production Support Department Budgeted Activity Cost * 428,750 245,000 183,750 367,500 ¥1,225,000 Setup Production control Quality control Materials management Total Zhedong estimated the following activity-base usage and units produced for each of its thi products: Number of Direct Production Material Products Units Labor Hrs. Setups Orders Inspections Requisition LCD TV... 10,000 25,000 80 80 35 320 Tablet.... 2,000 10,000 40 40 40 400 Smartphone. 50,000 140,000 175,000 30 Total cost 62,000 125 125 75 750 Instructions 1. Which method provides more accurate product costing? Why?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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