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    Activity Based Costing

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    ABC vs. Traditional Cost Analysis

    Standard High-grade Total
    Direct Labor $160,000 $80,000 $240,000
    Direct Materials $125,000 $114,000 $239,000
    CDs Produced 320,000 120,000 440,000
    CD Selling Price $3.60 $5.80

    Activity Level
    Costs Assigned Standard High-grade Total
    Number of Production Runs $300,000 20 10 30
    Quality Tests Performed $360,000 12 18 30
    Shipping Orders Processed $220,000 100 50 150
    Total Overhead $880,000

    a. How much of the overhead will be assigned to each product if the three cost drivers are used
    to allocate overhead? What would be the cost per unit produced for each product?

    b. How much of the overhead would have been assigned to each product if direct labor cost had
    been used to allocate overhead? What would have been the total cost per unit produced for each
    product?

    c. How might the results explain why profits did not increase as much as management expected?

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    https://brainmass.com/business/product-costing/270310

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    Solution Summary

    The solution explains overhead allocation using traditional costing and activity based costing

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