Kya, Inc. manufactures two models of high-pressure steam valves, the XR7 model and the ZD5 model....

  

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Kya, Inc. manufactures two models of high-pressure steam valves, the XR7 model and the ZD5 model. Budgeted manufacturing overhead cost and operating data regarding production and sales of 2,000 units of the XR7 model and 8,000 units of the ZD5 model for 2005 follow: Activity Cost Pool Machine setups Vendor negotiations Assembly Total Budgeted Overhead Costs Cost Driver $800,000 Number of setups 200,000 Number of parts 400,000 Direct labour hours $1,400,000 Budgeted Level for Cost Driver XR7 150 800 ZD5 100 200 4,000 36,000 Total 250 1,000 40,000 1. Identify and briefly explain each of the three cost drivers as either unit-level or batch-level or product-level or organization-sustaining level. (3 marks) 2. Calculate the budgeted manufacturing overhead cost for each unit of the two models, using only one unit-level cost driver. (5 marks) 3. Calculate the budgeted manufacturing overhead cost for each unit of the two models, using the activity-based-costing (ABC) method. (10 marks) 4. Assume Kya, Inc. will use only the unit-level driver. Compared to the ABC method, by how much (in terms of total allocated / applied manufacturing overhead cost), if any, will the total output of each model be either under-costed or over-costed? Kya, Inc. manufactures two models of high-pressure steam valves, the XR7 model and the ZD5 model. Budgeted manufacturing overhead cost and operating data regarding production and sales of 2,000 units of the XR7 model and 8,000 units of the ZD5 model for 2005 follow: Activity Cost Pool Machine setups Vendor negotiations Assembly Total Budgeted Overhead Costs Cost Driver $800,000 Number of setups 200,000 Number of parts 400,000 Direct labour hours $1,400,000 Budgeted Level for Cost Driver XR7 150 800 ZD5 100 200 4,000 36,000 Total 250 1,000 40,000 1. Identify and briefly explain each of the three cost drivers as either unit-level or batch-level or product-level or organization-sustaining level. (3 marks) 2. Calculate the budgeted manufacturing overhead cost for each unit of the two models, using only one unit-level cost driver. (5 marks) 3. Calculate the budgeted manufacturing overhead cost for each unit of the two models, using the activity-based-costing (ABC) method. (10 marks) 4. Assume Kya, Inc. will use only the unit-level driver. Compared to the ABC method, by how much (in terms of total allocated / applied manufacturing overhead cost), if any, will the total output of each model be either under-costed or over-costed?

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Question 1 Particulars Classification 1 Machine Setups Batch Level Cost 2 Vendor Negotiation Product Level Cost 3 Assembly Unit Level Cost Explanation... View the full answer