FUNDAMENTAL ACCOUNTING PRINCIPLES
FUNDAMENTAL ACCOUNTING PRINCIPLES
25th Edition
ISBN: 9781264303236
Author: Wild
Publisher: MCG
Question
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Chapter C, Problem 12E

1.

To determine

Concept Introduction:

Activity-based costing: Activity-based costing is one of the cost allocation methods where overhead costs are allocated based on activity usage. It can be determined by using multiplying activity rate and activity usage. Activities can be classified as production, setups, design, and factory services.

The product cost per unit for each product.

2.

To determine

Concept Introduction:

Activity-based costing: Activity-based costing is one of the cost allocation methods where overhead costs are allocated based on activity usage. It can be determined by using multiplying activity rate and activity usage. Activities can be classified as production, setups, design, and factory services.

The product cost per unit on activity-based costing method for each product.

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Precision Manufacturing Inc. (PMI) makes two types of industrial component parts-the EX300 and the TX500. It annually produces 69,000 units of EX300 and 13,400 units of TX500. The company's conventional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below: EX300 $375,325 $129,000 Total $546,875 $176,000 TX500 Direct materials Direct labor $171,550 $ 47,000 The company is considering implementing an activity-based costing system that distributes all of its manufacturing overhead to four activities as shown below: Activity Manufacturing Overhead $182,600 249,900 187,070 84,460 $704,000 Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-level (number of products) General factory (direct labor dollars) EX300 99,000 120 1 TX500 67,000 390 1 Total 166,000 510 2 $129,000 $47,000…
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Question 1 Trimake Limited makes three main products, using broadly the same production methods and equipment for each. A conventional product costing system is used at present, although an activity-based costing (ABC) system is being considered. Details of the three products for a typical period are: Product X Product Y Product Z Hours per unit Labour hours ½ 1½ 1 Product X Product Y Product Z Costs relating to setups Costs relating to machinery Costs relating to materials handling Costs relating to inspection Total production overhead Required: Machine unit 1½ 1 3 Direct labour costs £14 per hour and production overheads are absorbed on a machine-hour basis. The rate for the period is £28 per machine hour. a) You are required to calculate the cost per unit for each product using conventional methods. Further analysis shows that the total of production overheads can be divided as follows: Number of set-ups 75 115 480 670 The following activity volumes are associated with the product…
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