Company A manufactures a line of high-end exercise equipment of commercial quality. Assume that the Controller...

  

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Company A manufactures a line of high-end exercise equipment of commercial quality. Assume that the Controller has proposed changing from a traditional costing system to an activity-based costing system. The Vice-President Finance is not convinced, so she requests that the next large order for equipment be costed under both systems to compare and analyze. The company receives an order from Slim Inc, for 150 low impact treadmills, which the Controller identifies as the order to use for dual costing. The following cost data relate to the Slim Inc order: Data Relevant to Both Costing Systems: $55,500 820 $18 Direct materials Direct labour hours Direct labour rate per hour Data Relevant to the Traditional Costing System: The predetermined overhead rate is 300% of direct labour cost. Data Relevant to the Activity-Based costing System: Activity Cost Pools Engineering design Machine set-up Machining Assembly Packaging & Shipping Building occupancy 732 Cost Drivers Engineering hours Set-ups Machine hours Number of sub- assemblies Packaging & hours Machine hours Activity-Based Overhead Rate $30 per hour $200 per set-up $25 per hour $8 per sub- assembly $15 per hour $6 per hour Required: Calculate the total cost of the Slim Inc order under Expected Use of Cost Drivers Per Treadmill 330 22 732 1,450 152 a) The traditional costing system I b) The activity-based costing system c) As a result of this comparison which costing System Company A likely to adopt? And why? 100% Company A manufactures a line of high-end exercise equipment of commercial quality. Assume that the Controller has proposed changing from a traditional costing system to an activity-based costing system. The Vice-President Finance is not convinced, so she requests that the next large order for equipment be costed under both systems to compare and analyze. The company receives an order from Slim Inc, for 150 low impact treadmills, which the Controller identifies as the order to use for dual costing. The following cost data relate to the Slim Inc order: Data Relevant to Both Costing Systems: $55,500 820 $18 Direct materials Direct labour hours Direct labour rate per hour Data Relevant to the Traditional Costing System: The predetermined overhead rate is 300% of direct labour cost. Data Relevant to the Activity-Based costing System: Activity Cost Pools Engineering design Machine set-up Machining Assembly Packaging & Shipping Building occupancy 732 Cost Drivers Engineering hours Set-ups Machine hours Number of sub- assemblies Packaging & hours Machine hours Activity-Based Overhead Rate $30 per hour $200 per set-up $25 per hour $8 per sub- assembly $15 per hour $6 per hour Required: Calculate the total cost of the Slim Inc order under Expected Use of Cost Drivers Per Treadmill 330 22 732 1,450 152 a) The traditional costing system I b) The activity-based costing system c) As a result of this comparison which costing System Company A likely to adopt? And why? 100%

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a Traditional Costing System Amount in Direct materials 55500 Direct labor 14760 820 x 18 ... View the full answer