Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: the
Question:
Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: the deluxe and the regular. At the beginning of the year, the following data were prepared for this plant:
Deluxe | Regular | |
Quantity | 100,000 | 800,000 |
Unit Prime Costs | $ 529.00 | $ 483.00 |
The CFO has always used a pre-determined overhead rate to allocate overhead to the 2 product lines, they had traditionally used machine hours as the allocation base.
A recent new grad from Schulich had suggested the company consider Activity-Based Costing. A study was completed as shown below in part 2.
Required:
- Using the traditional costing system, provide a product cost for each product line, please show all work.
- Using the following data from ABC study, provide a product cost for each product line, please show all work.
Activity Driver | Activity Budget | Deluxe | Regular |
Number of setups | $ 25,000,000 | 350 | 150 |
Machine Hours | $ 70,000,000 | 100,000 | 600,000 |
Engineering Hours | $ 15,000,000 | 50,000 | 100,000 |
Packing Orders | $ 2,000,000 | 100,000 | 400,000 |
3-Provide a report for management comparing your methods.
Cornerstones of Financial and Managerial Accounting
ISBN: 978-1111879044
2nd edition
Authors: Rich, Jeff Jones, Dan Heitger, Maryanne Mowen, Don Hansen