Question

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Practice Problem 3 Problem Activity Based Costing Tyson lamp Company is noted for a full line of quality lamps. The company operates one of its plants in Green Bay, Wisconsin. That plant produces two types of lamp: classical and modem. Jane Martinez the president of the company, recently decided to change from a unit-based, traditional costing system to an activity-based cost system. Before; making the change company wide. She wanted to asses the effect on the product costs of the Green Bay plant. This plant was chosen because it produces only two types of lamps, most other plants produce at least a dozen To assess the effect of the change, the following data have been gathered (for simplicity, assume one process): Direct Machine Material Lamp Quantity Hours Moves Setups Classical 400,000 $800,000 100,000 200,000 100 Modern 100,000 $150,000 25,000 100,000 50 Dollar value $950,000 $500,000 $850,000 $650,000 *The cost of operating the production equipment Under the current system, the costs of operating equipment, materials handling, and set-ups are assigned to the lamps on the basis of machine hours. Lamps are produced and moved in batches. REQUIRED A. Compute the unit cost of each lamp using the current unit-based approach. B. Compute the unit cost of each lamp using an activity-based costing approach. C. Compare your answers for part 1 and 2 and briefly discuss the implications of your findings.

Answer 1

1 Stadinant showing vuit cast of each lamp using vuit Bersed Apprechia Particulars. Basis classical Total Modern 1950000 150,000 Diruet lost I Griven 1 800,000 Machining cash Machine Hours 400,000 100,000 50.000 Material moves Machine Hours 680000 170000 850000 Set up cost Machine Hours 520,600 130cco 65000 2400067 55000 | 295.000 Tool Cost 40000 508060 5.5 Cast 6.00 Per Unit بلشن 4 ما Taal clossical Modern 150,000 100,000 ® Activity Based Approach & Direct Cost Machining Material more Schup cost Total Col No. of vuity Cost Per vuit Bosis SU0000 Griven Machin hours | 400,000 Material moves | 566,667 sel-ups 433,313 950000 500,000 $50000 65000 283,319 216667 2950000 2200000 400006 .50 750,000 Tou do 7.5

0 Comparision between part 1 and fort 28 modern Classic Cell Reu vult as pu fost I 16.00 15.50 Cost Per vuit as ren post a Difference Tao +1 Condusiones In classic lamp Our cost per vuit & current approach Composed to in case 0.5o as of moden lamp our cost per und is increased by 1.00 as composed to Current Approach