Prepare a 2-3 page memorandum to the CFO of Digitales Supersnicos S.A summarizing your findings, and why
Question:
Prepare a 2-3 page memorandum to the CFO of Digitales Supersónicos S.A summarizing your findings, and why you think the job order-based cost method gives you more useful information to make decisions for the company. Include in the memo at least 4 reasons why you think activity-based costing is more useful. Like any text document, it must follow the APA 7 format and include the memorandum within the content section.
Calculation of Cost per Unit:
Chip Ultra Nitido | Chip Virtual Reality | ||
Prime Cost | $67,250 | $81,400 | |
Overhead Cost | $63,057 | $95,603 | |
($67.80 * 930) | ($67.80*1410) | ||
Total Cost of Manufacturing | $130,307 | $177,003 | |
Total Units Produced | 52000 | 62500 | |
Cost per Unit | $2.51 | $2.83 |
Allocation of Overhead Cost using ABC Method:
Chip Ultra Nitido | Chip Virtual Reality | ||
Preparation Cost | $39,693 | $47,707 | |
($87400*104/229) | ($87400*125/229) | ||
Electricity Cost | $6,717 | $10,183 | |
($16900*930/2340) | ($16900*1410/2340) | ||
Engineering Support | $19,888 | $34,472 | |
($54360*45/123) | ($54360*78/123) | ||
Total Overhead Cost | $66,297 | $92,363 |
Calculation of Cost per unit of each product:
Chip Ultra Nitido | Chip Virtual Reality | ||
Prime Cost | $67,250 | $81,400 | |
Overhead Cost | $66,297 | $92,363 | |
Total Cost of Manufacturing | $133,547 | $173,763 | |
Total Units Produced | 52000 | 62500 | |
Cost per Unit | $2.57 | $2.78 |
Cost per unit of the products under two methods:
Chip Ultra Nitido | Chip Virtual Reality | ||
Process Based Costing Method | $2.51 | $2.83 | |
Activity-Based Costing Method | $2.57 | $2.78 | |
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill