ACCT $254$

Unit$-$Level and Batch$-$Level Allocation Assignment

ABC Company produces two types of computer Monitors. The Super line is made to provide excellent views for the most demanding applications. The Solid line is geared toward workplace use and delivers average performance. During its most recent accounting period, the company incurred $$100,000$ of inspection costs. Its production activities were classified into four cost centers, unit$-$level, batch$-$level, product$-$level, and facilitylevel. The following cost and cost driver information is provided for the unit$-$level and batch$-$level cost centers:

Cost Center

Cost Driver

Super Line

Solid Line

Totals

Required:

Unit$-$Level

# of DLHs

$8,000$

$12,000$

$20,000$

Batch$-$Level

# of Batches

$30$

$10$

$40$

Allocate the inspection cost between the two products assuming the inspection cost is driven by a$)$ only unit$-$level activities; b$)$ only batch$-$level activities.

How should managers of the company determine which allocation is more appropriate?