Question: need help with this problem , Inc. uses a volume-based costing system that applies overhead cost based on set ups at $1,000 per set up.
need help with this problem
, Inc. uses a volume-based costing system that applies overhead cost based on set ups at $1,000 per set up.
The company is considering adopting an activity-based costing system with the following data:
| Activity | Cost Driver | Rate |
| Purchasing | Purchase orders | $5.00 |
| Receiving | Shipment received | 4.00 |
| Machine setups | Number of setups | 60.00 |
| Quality control | Inspections | 7.00 |
The two jobs processed in the month of May had the following characteristics:
| Job A | Job B | |
| Direct material | $12,000 | $60,000 |
| Direct labor | $6,000 | $12,000 |
| Purchase orders | 900 | 3,000 |
| Shipments received | 450 | 1,500 |
| Number of setups | 10 | 30 |
| Number of units in each job | 400 | 1,200 |
*All units inspected
The difference in total cost between ABC and the volume-based costing system for Job B is:
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