Following is information about Aztech Industries: Use activity-based costing to
ID: 2565225 • Letter: F
Question
Following is information about Aztech Industries:
Use activity-based costing to calculate the total cost for each Model C Heater. Allocate Labor Support using direct labor hours, Materials Support using number of parts, and Facility Cost using square feet.
A step-by-step on how to solve the problem would be super helpful; a traditional method without using Excel or other computer programs would be appreciated, as we don't have access to those amenities for this class. Thank you!
Model A Model B Model C Total Units Produced 300 500 200 1,000 Direct materials (per unit) $50 $75 $100 Direct labor (per unit) $20 $50 $40 Cost driver information: number of parts (per unit) 20 42 30 direct labor hours (per unit) 3 4.60 4 square feet (in total for all units) 400 600 1,000 Overhead costs: Labor Support $22,000 Materials Support $33,000 Facility Cost $90,000 Total overhead $145,000Explanation / Answer
Step - 1
Firstly we have to calculate the cost per cost driver using the ABC
For computing activity base
Labour support = 300 *3 hours + 500 * 4.6 hours + 200 * 4 hours = 4000 direct labor hours.
Material support = 300 *20 parts + 500 * 42 parts + 200 * 30 parts = 33000 parts
Square feet = 400 + 600 + 1000 = 2000 sq feet.
Step - 2
Explanation
(1) Material cost is computed by multiplying the number of units of production with material cost per unit. Example for model - A = 300 Units * 50 per unit = 15000
(2) Labor cost is computed by multiplying the number of units of production with labor cost per unit. Model - A 300 units produced * 20 per hour = 6000
(3) Labor support cost ------- For model - A = 300 units * 3 hour per unit * 5.50 per hour ( refer step - 1 )
For model - B = 500 units * 4.6 hours per unit * 5.50 per hour.......Model - C 200 units * 4 per units * 5.50 per hour.
(4) Material support .........Model - A = (300 Units * 20 parts per unit * 1 per part ( refer step - 1)
Model - B = 500 units * 42 parts per unit * 1 per part and finally Model - c = 200 * 30 parts * 1 per part
(5) Facility cost is easily calculated by muliplying with the total square feet.
A = 400 * 45 per sq feet. ....... B = 600 * 45 pers sq feet .........and C = 1000 * 45
Amount Activity base Rate Labor support 22000 4000 Labour hours 5.50 per hour Material support 33000 33000 parts 1 per part Facility cost 90000 2000 square feet 45 per sq feet