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Activity Based Costing

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U4A1 Problem 1 All other problems are in sheet 2 and 3
Lam on the Run Corporation uses Activity Based Costing data for internal decisions. The company has the following four activity costs pools.
Activity cost pool annual Activity
Producing Unit 10,000 machine-hours]
Processing orders 1,000 orders
Customer support 100 Customers
Overhead costs both manufacturing and non-manufacturing are allocated to jobs using the ABC system. These overhead costs are :
Indirect labor wages $100,000
other manufacturing overhead 300,000
Selling and Adminstration Expense 100,000

In developing the Lam on the Run Corporation Activity Based Costing System, employees were asked how they distributed each ones time and reseources
across the three activity cost pools. Below are the results of the employee imput:

Production Units Other MFG Ovh Custome support
Indirect labor wages 40% 40% 40% 20%
other manufacturing overhead 30% 10% 60%
Selling and Adminstrative expense 0% 20% 80%

A. Using the results of the information from employees, please complete the FIRST STAGE Allocation of costs to the activity costs pools.

Production Units Other MFG Ovh Custome support total

Indirect labor wages 40% $ $ $ $
other manufacturing overhead $ $ $ $
Selling and Adminstrative expense $ $ $ $

total $ $ $ $

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Solution Summary

The solution provide an example of Activity Based Costing using Lam on the Run Corporation data.

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Read this article:Throw Out Fixed and Variable Cost Thinking Bring In Activity-Based Costing for Distribution Decisions, Discuss the assertions this author is making in terms of variable and fixed costing and why ABC may make more sense in these type of settings. Justify your answer with good reasoning. You should attempt to integrate the thoughts of this article and your critique of it with the comments you make above.

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