Weng Company makes two types of cell phones. Handy is a thin, pocket-size cell phone that is easy to carry around. Action is a palm-size phone convenient to hold while the user is talking. During its most recent accounting period, Weng incurred $225,000 of quality-control costs.
Recently Weng established an activity-based costing system, which involved classifying its activities into four categories. The categories and appropriate cost drivers follow.

Weng uses direct labor hours to allocate unit-level activities, number of batches to allocate batch-level activities, number of engineers to allocate product-level activities, and number of square feet to allocate facility-level activities.

Allocate the quality-control cost between the two products, assuming that it is driven by (a) unit-level activities,
(b) batch-level activities,
(c) product-level activities,
(d) facility-level activities.
Note that each allocation represents a separate allocation. In other words, the $225,000 of quality-control costs will be allocated four times, once for each costdriver.

  • CreatedFebruary 07, 2014
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