Company XYZ has 6 standard products from stainless steel and brass. The company’s most popular product is Product XX. The information below shows Product XX’s data for next year’s budget. Using this information,
a) calculate the budgeted overhead costs using activity-based costing principles
b) calculate the budgeted overhead costs using absorption costing (absorb overhead using machine hours)
c) how can the company reduce the ABC for Product XX:
|
Customer |
AAA |
BBB |
|
Component Type |
A999 |
B999 |
|
Contract Value ($) |
$27,000 |
$100,000 |
|
Contract Quantity |
1,000 unit |
2,000 unit |
|
Material cost/unit |
$15 |
$20 |
|
Moulding time/batch |
5 hours |
7.5 hours |
|
Batch size |
100 units |
50 units |
|
Activity |
Cost Driver |
Cost Driver Volume/Yr |
Cost Pool |
|
Purchasing |
Purchase orders |
1,500 |
$75,000 |
|
Setting |
Batches produced |
2,800 |
$112,000 |
|
Materials handling |
Materials movements |
8,000 |
$96,000 |
|
Inspection |
Batches produced |
2,800 |
$70,000 |
|
Machining costs |
Machine hours |
50,000 |
$150,000 |
|
Purchase orders |
25 |
|
Output |
15,000 units |
|
Production batch size |
100 units |
|
Materials movements per batch |
6 |
|
Machine hours per unit |
0.1 |
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