Recalculate the cost of the five orders using activity based costing. Comment on the difference in cost
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Exhibit 1: Cost data for the quarter ending September 30 19XX (in Euro $) DIRECT COSTS Direct Labour Drafting room Machine shop Assembly shop Direct supplies TOTAL FACTORY DIRECT COSTS INDIRECT OVERHEAD COSTS Factory indirect costs Foreman and indirect workers Warehouseman Oven attendant Administrative and management personnel Indirect factory labour Coal for the oven Power Building expense (rent, insurance, & taxes) Office expense (postage, telephone, ect.) Interest on equipment loans (14,000,000 @6% p.a) Depreciation of equipment Other indirect factory costs TOTAL FACTORY INDIRECT COSTS Selling indirect costs Sales commissions Delivery driver Truck expense (depreciation, garage) TOTAL SELLING INDIRECT COSTS Allocation rates Factory cost rate: 3,192,000/ 1,266,000 = 252% Selling cost rate: 330,000/ 5,472,000 = 6.03% 270,000 740,000 256,000 450,000 90,000 90,000 978,000 80,000 36,000 330,000 198,000 210,000 730,000 1,266,000 144,000 1,410,000 1,608,000 1,584,000 3,192,000 154,000 126,000 50,000 330,000 Exhibit 1: Cost data for the quarter ending September 30 19XX (in Euro $) DIRECT COSTS Direct Labour Drafting room Machine shop Assembly shop Direct supplies TOTAL FACTORY DIRECT COSTS INDIRECT OVERHEAD COSTS Factory indirect costs Foreman and indirect workers Warehouseman Oven attendant Administrative and management personnel Indirect factory labour Coal for the oven Power Building expense (rent, insurance, & taxes) Office expense (postage, telephone, ect.) Interest on equipment loans (14,000,000 @6% p.a) Depreciation of equipment Other indirect factory costs TOTAL FACTORY INDIRECT COSTS Selling indirect costs Sales commissions Delivery driver Truck expense (depreciation, garage) TOTAL SELLING INDIRECT COSTS Allocation rates Factory cost rate: 3,192,000/ 1,266,000 = 252% Selling cost rate: 330,000/ 5,472,000 = 6.03% 270,000 740,000 256,000 450,000 90,000 90,000 978,000 80,000 36,000 330,000 198,000 210,000 730,000 1,266,000 144,000 1,410,000 1,608,000 1,584,000 3,192,000 154,000 126,000 50,000 330,000
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To recalculate the cost of the five orders using activitybased costing ABC we need to allocate the indirect costs based on the activity measures provi... View the full answer
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Managerial Accounting for Managers
ISBN: 978-1259578540
4th edition
Authors: Eric Noreen, Peter Brewer, Ray Garrison
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