The Manufacturing Division of an Electronics Company Uses Activity-Based Costing

question 97

Essay

The manufacturing division of an electronics company uses activity-based costing.The company has identified three activities and the related cost drivers for indirect production costs.
Three types of products are produced.Direct costs and cost-driver activity for each product for a month are as follows:
Indirect production costs for the month are as follows:
Required:
A)Compute the indirect production costs allocated to each product using the ABC system.
B)Compute the indirect production costs allocated to each product using a traditional costing system.Assume indirect production costs are allocated to each product using the cost driver: direct labor hours.

• A)Compute the indirect production costs allocated to each product using the ABC system.
• B)Compute the indirect production costs allocated to each product using a traditional costing system.Assume indirect production costs are allocated to each product using the cost driver: direct labor hours.

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Definitions:

Incremental Cash Flows

The additional cash flow a company receives from taking on a new project or investment, after accounting for expenses.