Explore BrainMass

Explore BrainMass

    Activity based costing vs traditional costing

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    I am looking to try and understand the decision making process regarding the example below. I am hoping that based on my values I can make a better suggestion to management.

    Estimated
    Activity Overhead
    Cost pool Costs Product C Product D Total

    Machine set-up $13,630 130 160 290
    Purchase orders $85,750 750 1,000 1,750
    General factory $67,760 4,000 2,160 6,160
    $167,140

    How would I calculate the unit product cost for both C and D which system would be better? the traditional system based on direct labor hours or the activity based costing system?

    © BrainMass Inc. brainmass.com June 3, 2020, 10:52 pm ad1c9bdddf
    https://brainmass.com/business/management-accounting/activity-based-costing-vs-traditional-costing-253631

    Solution Preview

    Dear student,

    ACTIVITY BASED COSTING attempts to ensure that every cent spent by an organization, including direct and overhead costs, is allocated to the products or services in the most equitable way in order to ...

    Solution Summary

    The solution contains the computation of cost per unit under activity based costing and traditional costing

    $2.19

    ADVERTISEMENT