Create the Spreadsheets to compare traditional costing versus activity-based costing. Use the results to answer questions...

 

Transcribed Image Text:

Create the Spreadsheets to compare traditional costing versus activity-based costing. Use the results to answer questions about the findings. Suppose Sunstar Corporation is one of Dell's circuit board suppliers. Sunstar currently uses traditional costing for making business decisions, where the direct costs are only a cost driver to allocate all the indirect production costs. At the urging of Dell, however, the company had decided to move to activity-based costing for circuit board production related to products PCB124 and PCB136. As one of the company's manager, you have been asked to prepare a spreadsheet comparing the two costing methods for the next company board meeting. Your supervisor has given you the following quarterly data: Table 1. Sales & Costs in quarter Total ($) РСB124 РСВ136 Sales 1,500,000 700,000 800,000 Direct Costs (materials, labor) 340,640 162,400 178,240 All Indirect Production Cost 1,060,000 All Unallocated Value Chain Cost 100,000 Requirement 1. Construct Income Statement and calculate gross profit and gross profit margin for each product based on Traditional Cost Allocation System. Sunstar Corp. Income Statement by Traditional Allocation Sys Total РСВ124 PCB136 Requirement 2. Construct Income Statement and calculate gross profit and gross profit margin for each product based on Activity-Based Costing Allocation System. ($) Table 2. Indirect Production Cost by activities Assembly activity Soldering activity Inspection activity 630,000 270,000 160,000 Total 1,060,000 Table 3. Indirect Production Cost Drivers by act Machine hours for assembly activity (Hours) Number of units produced for soldering activity (#) Total PCB124 РСВ136 1,560 480 1,080 10,000 6,000 4,000 Testing hours for inspection activity (Hours) 14,000 6,000 8,000 Sunstar Corp. Income Statemen by ABC Allocation System Total РСВ124 РСВ136 Requirement 3. (1) Explain why the results differ significantly between the traditional system and ABC system. (2) Plan production and marketing strategy based on the results. Create the Spreadsheets to compare traditional costing versus activity-based costing. Use the results to answer questions about the findings. Suppose Sunstar Corporation is one of Dell's circuit board suppliers. Sunstar currently uses traditional costing for making business decisions, where the direct costs are only a cost driver to allocate all the indirect production costs. At the urging of Dell, however, the company had decided to move to activity-based costing for circuit board production related to products PCB124 and PCB136. As one of the company's manager, you have been asked to prepare a spreadsheet comparing the two costing methods for the next company board meeting. Your supervisor has given you the following quarterly data: Table 1. Sales & Costs in quarter Total ($) РСB124 РСВ136 Sales 1,500,000 700,000 800,000 Direct Costs (materials, labor) 340,640 162,400 178,240 All Indirect Production Cost 1,060,000 All Unallocated Value Chain Cost 100,000 Requirement 1. Construct Income Statement and calculate gross profit and gross profit margin for each product based on Traditional Cost Allocation System. Sunstar Corp. Income Statement by Traditional Allocation Sys Total РСВ124 PCB136 Requirement 2. Construct Income Statement and calculate gross profit and gross profit margin for each product based on Activity-Based Costing Allocation System. ($) Table 2. Indirect Production Cost by activities Assembly activity Soldering activity Inspection activity 630,000 270,000 160,000 Total 1,060,000 Table 3. Indirect Production Cost Drivers by act Machine hours for assembly activity (Hours) Number of units produced for soldering activity (#) Total PCB124 РСВ136 1,560 480 1,080 10,000 6,000 4,000 Testing hours for inspection activity (Hours) 14,000 6,000 8,000 Sunstar Corp. Income Statemen by ABC Allocation System Total РСВ124 РСВ136 Requirement 3. (1) Explain why the results differ significantly between the traditional system and ABC system. (2) Plan production and marketing strategy based on the results.

Answer rating: 100% (QA)

Requirement 1 Traditional Costing Income Statement B124 PCB136 To... View the full answer