Activity based costing vs traditional costing
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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?
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Solution Summary
The solution contains the computation of cost per unit under activity based costing and traditional costing
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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 ...
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