PTech Ltd. manufactures two models of cordless phones. The Family Friend model has features designed for a multiple-user family, including the ability to have multiple ringtones and caller ID. The Office Assistant model is designed for use in home offices. Data regarding the two product lines are as follows:
PTech is considering implementing an activity-based costing (ABC) system in its plant and has identified four primary activities. Data on these activities are as follows:
1. Calculate the manufacturing overhead allocation rate for each activity using ABC.
2. Compute the unit cost of each model of phone using ABC.
3. Assume the company currently allocates overhead on the basis of direct labour costs.
Compute the unit cost of each model of phone using this method.
4. Compare the unit costs of each model calculated in requirements 2 and 3. Comment on your results.

  • CreatedJuly 31, 2015
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