Tyson Lamp Company is noted for its full line of quality lamps. The company operates one...

 

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Tyson Lamp Company is noted for its full line of quality lamps. The company operates one of its plants in Green Bay, Wisconsin. That plant produces two types of lamps: classical and modern. Jane Martinez, president of the company, recently decided to change from a unit-based, traditional costing system to an activity-based costing system. Before making the change companywide, she wanted to assess the effect on the product costs of the Green Bay plant. This plant was chosen because it produces only two types of lamps; most other plants produce at least a dozen. To assess the effect of the change, the following data have been gathered (for simplicity, assume one process): Quantity Prime Costs Lamp Classical 400,000 Machine Hours Material Moves Setups $800,000 81,250 43.750 300,000 100 Modern 100,000 $150.000 100,000 50 Dollar amount $950,000 $500.000* $900,000 $600,000 *The cost of operating the production equipment. Under the current system, the costs of operating equipment, materials handling, and setups are assigned to the lamps on the basis of machine hours. Lamps are produced and moved in batches. Required: 1. Compute the unit cost of each lamp using the current unit-based approach. 2. Compute the unit cost of each lamp using an activity-based costing approach. 3. Show how a reduced system using two cost pools and two drivers, moves and setups, can be used to achieve the same cost assignments obtained in Requirement 2. Tyson Lamp Company is noted for its full line of quality lamps. The company operates one of its plants in Green Bay, Wisconsin. That plant produces two types of lamps: classical and modern. Jane Martinez, president of the company, recently decided to change from a unit-based, traditional costing system to an activity-based costing system. Before making the change companywide, she wanted to assess the effect on the product costs of the Green Bay plant. This plant was chosen because it produces only two types of lamps; most other plants produce at least a dozen. To assess the effect of the change, the following data have been gathered (for simplicity, assume one process): Quantity Prime Costs Lamp Classical 400,000 Machine Hours Material Moves Setups $800,000 81,250 43.750 300,000 100 Modern 100,000 $150.000 100,000 50 Dollar amount $950,000 $500.000* $900,000 $600,000 *The cost of operating the production equipment. Under the current system, the costs of operating equipment, materials handling, and setups are assigned to the lamps on the basis of machine hours. Lamps are produced and moved in batches. Required: 1. Compute the unit cost of each lamp using the current unit-based approach. 2. Compute the unit cost of each lamp using an activity-based costing approach. 3. Show how a reduced system using two cost pools and two drivers, moves and setups, can be used to achieve the same cost assignments obtained in Requirement 2.

Answer rating: 100% (QA)

Answer Solution Ans1 Total Fixed Cost Operating MachinesMaterial HandlingSetup500000... View the full answer