Accessorize make and sell two products called X and Y. An activity-based costing system has been...

 

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Accessorize make and sell two products called X and Y. An activity-based costing system has been implemented to replace the traditional absorption costing system. The annual estimated production activity cost pools and cost driver activity levels for all output are as follows: Activity Level Activity Cost Pool (S) Purchasing materials $160,000 Storing materials $170,000 Setting up machinery $100,000 Running machinery cost $250,000 Total production overhead $750000 An analysis of actual annual production usage based on activity cost pool for two products types are as follows: X Units produced Purchase orders 4,000 purchase orders 3400 issue notes 100 set ups 25000 machine hours Stores issue notes Setups Machine hours Direct materials Direct labor 4,000 units 2000 units 1400 700 250 5000 800 250 140 10000 $35000 $15000 $200000 $30000 Required: a) Calculate the production cost per unit for X and Y using the machine hour overhead absorption rate under the traditional system. (5 marks) b) Calculate the activity rates. (2 marks) c) Calculate the production cost per unit for X and Y using the activity-based costing system. (5 marks) d) Comment on the costing of both the products under absorption (traditional) costing and activity-based costing methods based on your calculations. (3 marks) Accessorize make and sell two products called X and Y. An activity-based costing system has been implemented to replace the traditional absorption costing system. The annual estimated production activity cost pools and cost driver activity levels for all output are as follows: Activity Level Activity Cost Pool (S) Purchasing materials $160,000 Storing materials $170,000 Setting up machinery $100,000 Running machinery cost $250,000 Total production overhead $750000 An analysis of actual annual production usage based on activity cost pool for two products types are as follows: X Units produced Purchase orders 4,000 purchase orders 3400 issue notes 100 set ups 25000 machine hours Stores issue notes Setups Machine hours Direct materials Direct labor 4,000 units 2000 units 1400 700 250 5000 800 250 140 10000 $35000 $15000 $200000 $30000 Required: a) Calculate the production cost per unit for X and Y using the machine hour overhead absorption rate under the traditional system. (5 marks) b) Calculate the activity rates. (2 marks) c) Calculate the production cost per unit for X and Y using the activity-based costing system. (5 marks) d) Comment on the costing of both the products under absorption (traditional) costing and activity-based costing methods based on your calculations. (3 marks)