Briteglow Paints is a commercial wholesaler that makes specialty paints for painting companies. It purchases paint...

 

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Briteglow Paints is a commercial wholesaler that makes specialty paints for painting companies. It purchases paint from manufacturers and mixes it to order. Each order incurs three batch-level costs: materials ordering, quality control, setups and material handling. These costs are included in overhead, which is allocated using machine time (10,000 machine hours are budgeted for the year). Budget information for these costs includes: Ordering costs Quality control 120,000 180,000 100,000 60,000 Setup cost Material handling During the period following different activity levels has been recorded. No. of orders No. of inspections No. set ups No. of material requests 12,000 30,000 5,000 6,000 Raw material will cost 5 per gallon and direct labour 10 per gallon. It will require 3 machine hours, 2 material orders, 6 inspections, 4 setups and 7 material requests. Required: a. Calculate per unit overhead cost using conventional method. b. Re calculate per unit overhead cost using ABC costing. c. Calculate total unit cost on both basis and comment on the results you get by using above two approaches. Briteglow Paints is a commercial wholesaler that makes specialty paints for painting companies. It purchases paint from manufacturers and mixes it to order. Each order incurs three batch-level costs: materials ordering, quality control, setups and material handling. These costs are included in overhead, which is allocated using machine time (10,000 machine hours are budgeted for the year). Budget information for these costs includes: Ordering costs Quality control 120,000 180,000 100,000 60,000 Setup cost Material handling During the period following different activity levels has been recorded. No. of orders No. of inspections No. set ups No. of material requests 12,000 30,000 5,000 6,000 Raw material will cost 5 per gallon and direct labour 10 per gallon. It will require 3 machine hours, 2 material orders, 6 inspections, 4 setups and 7 material requests. Required: a. Calculate per unit overhead cost using conventional method. b. Re calculate per unit overhead cost using ABC costing. c. Calculate total unit cost on both basis and comment on the results you get by using above two approaches.

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