Activity Based Costing-MT Celestial Innovations Limited produces two items, Alpha (30,000 units) and Beta (10,000 units)....

Transcribed Image Text:

Activity Based Costing-MT Celestial Innovations Limited produces two items, Alpha (30,000 units) and Beta (10,000 units). The total manufacturing overhead expenses amount to $1,200,000, allocated based on labor hours, with $960,000 assigned to Alpha and $240,000 to Beta. To address profitability concerns, the company conducted an analysis of overhead costs, categorizing them into two activities: Machine Operations ($700,000) and Finishing Activities ($500,000). The examination revealed that machine operations are linked to machine hours, with both products sharing the total 80,000 machine hours equally, while finishing activities are associated with assembly hours, with Alpha utilizing 40% of the total 30,000 assembly hours, and the remainder allocated to Beta. Required: (a) Compute the manufacturing overhead cost per unit allocated to both products using the conventional allocation method dependent on direct labor hours (b) Determine the manufacturing overhead cost per unit allocated to both products using the activity-based costing approach. (c) (d) Analyze the findings from sections (a) and (b) and make inferences. Outline the key factors characterizing modern industrial production and elucidate how Activity-Based Costing addresses challenges within this context. (6 marks) (6 marks) (4 marks) (4 marks) Total marks (20 marks) Activity Based Costing-MT Celestial Innovations Limited produces two items, Alpha (30,000 units) and Beta (10,000 units). The total manufacturing overhead expenses amount to $1,200,000, allocated based on labor hours, with $960,000 assigned to Alpha and $240,000 to Beta. To address profitability concerns, the company conducted an analysis of overhead costs, categorizing them into two activities: Machine Operations ($700,000) and Finishing Activities ($500,000). The examination revealed that machine operations are linked to machine hours, with both products sharing the total 80,000 machine hours equally, while finishing activities are associated with assembly hours, with Alpha utilizing 40% of the total 30,000 assembly hours, and the remainder allocated to Beta. Required: (a) Compute the manufacturing overhead cost per unit allocated to both products using the conventional allocation method dependent on direct labor hours (b) Determine the manufacturing overhead cost per unit allocated to both products using the activity-based costing approach. (c) (d) Analyze the findings from sections (a) and (b) and make inferences. Outline the key factors characterizing modern industrial production and elucidate how Activity-Based Costing addresses challenges within this context. (6 marks) (6 marks) (4 marks) (4 marks) Total marks (20 marks)

Answer rating: 100% (QA)

Celestial Innovations Limited ActivityBased Costing Analysis Part a Conventional Allocation based on Direct Labor Hours Total direct labor hours not p... View the full answer