Calculate the cost per unit for these two jobs under a traditional system (using DLH) and under ABC. What are the implications of the differing results?

 

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Batty company has identified the following overhead activities, costs and cost drivers for the coming year: Activity Setup costs Ordering costs Machine costs Receiving Expected cost $30 000 13 500 30 000 10 000 Direct material Direct labour (5 hours / 10 hours @ $20 ph) Units completed Number of setups Number of orders Machine hours The following two jobs were completed during the year (amongst other jobs): Job 100 $75 $ 100 200 10 50 Cost driver 25 Number of setups Number of orders Machine hours Number of parts Parts used The company's normal activity is 2000 direct labour hours (DLH). 20 Job 200 $85 $200 150 5 22 30 20 Activity capacity 3 000 4 500 18 000 50 000 Batty company has identified the following overhead activities, costs and cost drivers for the coming year: Activity Setup costs Ordering costs Machine costs Receiving Expected cost $30 000 13 500 30 000 10 000 Direct material Direct labour (5 hours / 10 hours @ $20 ph) Units completed Number of setups Number of orders Machine hours The following two jobs were completed during the year (amongst other jobs): Job 100 $75 $ 100 200 10 50 Cost driver 25 Number of setups Number of orders Machine hours Number of parts Parts used The company's normal activity is 2000 direct labour hours (DLH). 20 Job 200 $85 $200 150 5 22 30 20 Activity capacity 3 000 4 500 18 000 50 000

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To calculate the cost per unit for the two jobs under a traditional system using DLH and under activitybased costing ABC we need to allocate the overh... View the full answer