Purchase Solution

Comparison of Single Cost Drivers to ABC

Not what you're looking for?

Ask Custom Question

A road contractor has been using kilometers of road constructed as a cost driver. Based on last years costs he estimates that he can build a kilometer of road for $3 million. The county has recently asked him for an estimate to build 20 kilometers of road.

Before making his bid based on his $3 million per kilometer estimate, he goes to his accountant for advice. The accountant has analyzed last year's costs much differently. She has divided last year's costs into different activities and chosen a cost driver and measured its useage last year. He estimates follow:

Activity Cost Cost Driver

Surveying $10 Hours 200,000 hours
Excavating 200 Tons of Earth Moved 2,000,000tons
Bridges 120 Number of bridges 60 bridges
Grading 80 Number of Kilometers 200 kilometers
Gravel 30 Tons of gravel 750,000 tons
Paving 160 Number of kilometers 200 kilometer

Purchase this Solution
Solution Summary

This solution is comprised of a detailed explanation and calculation to compare Single Cost Drivers to Activity Based Costing.

Solution Preview

We will need to calculate the total amount for the relevant activities to build the road as follows: -

Activity Cost ...

Purchase this Solution
Free BrainMass Quizzes
Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

View More Free Quizzes
Related BrainMass Solutions

  • Herron Electronics - ABC System

    ABC is more accurate as this system allocate cost according to the cost drivers. The overhead cost per rate of cost driver is calculated and then multiplied by the weight of cost centre.

  • Chicago Co: Activity-Based Costing (ABC) vs Traditional

    You have to track data for multiple cost drivers, compute and use many rates, and create reports and variances for all of them. Second, it is more complicated to review and understand.

  • Gross Profit Margin for Products using ABC/Traditional Costing

    The ABC system uses a variety of cost drivers related to the activities used to produce the hoses. The three products involved in the trial run of the ABC system were R-150, S-127, and M-63.

  • Costing

    262550 Ocean Sailboats: Overhead rate per machine using ABC, Traditional Costing The controller for Ocean Sailboats Inc., a company which uses an automated process to make sailboats, established the following overhead cost pools and cost drivers:

  • Activity Based Costing Allocation Rates

    Activities to Costs to Products b. Activity Cost Drivers to Performance Measures to Activities c. Activity Cost Drivers to Activities to Performance Measures d. Activity Cost Drivers to Activities to Performance Measures e.

  • For CFO, identify the activities and drivers, measurable

    Your tutorial gives you five activities, five matching cost drivers, and 175 words of discussion about the benefits of ABC and some common issues in implementing ABC.

  • Comparison of activity based and conventional product costs

    Hence it may lead to under costing of low production volume products. Moreover it fails to identify the cost drivers affecting the costing of the product.

  • Overhead Costs using Single Activity Base

    The overhead assigned to each activity is comprises the "activity cost pool".
    2. Identify cost drivers that arte appropriate for each activity cost pool.
    3.

  • Explain why Bovis Homes might need activity-based costing

    Nine potential cost pools are given with cost drivers for each. The post includes a discussion of the two main ways that ABC improves shareholder returns with examples. Reasons that Bovis is ideal for ABC are given.

View More Related Solutions