Part 4 plz part B (a) Prepare a production cost report for your company using th
ID: 2547750 • Letter: P
Question
Part 4 plz part B (a) Prepare a production cost report for your company using the weighted average method Instructions for Part 4 (Chapter 17) (a) For each of these cost pools, what would be the likely activity cost (b) Using the following information, determine the overhead rates and the actual co assigned for each of the activity cost pools in a possible ABC system for your company (c) (1) The results of ABC can provide a more accurate picture of costs. Discuss the value of your company using this system to determine overhead costs. (2) How might using ABC affect the decision making at your company? driver?
Explanation / Answer
a) Assembling assembly hour Payroll DLH Billing Number of customer Plant supervision number of units produced Product design number of design Janitorial Purchasing materials Units of material used Machine maintenance M hours Selling Units sold Machine setups number of setups Molding number of molds welding hours used Packaging Units manufactured b) Estimated cost and Actual cost: Activity cost pools Estimated overhead Expected use of activity Expected per unit cost Actual units Actual overhead assigned Irrigation installation $1,998,432 12900 $154.92 12921 2,001,685 Machining 2004480 33408000 $0.06 33409000 2,004,540 Customer orders 30636 2553 $12.00 2510 30,120 Shipping 0 n/a Design 880 8 $110.00 7 770 Selling 350400 21900 $16.00 22200 355,200 c) i) By the use of ABC system of overhead allocation, the company's products are accurately assigned costs, which allows the company to fix competitive price of the product. Thus, the company’s competitive value got raised. When more accurate pricing is contested against the competitive costs, the variable in profit can be minimised, so the company would become profitable, which provide consistancy value to company. ii) The use of the ABC will encourage the factor pricing, contract pricing, competitive pricing and relevant pricing in the management decision making.