Question

Company XYZ has 6 standard products from stainless steel and brass. The company’s most popular product is Product XX. The information below shows Product XX’s data for next year’s budget. Using this information, a) calculate the budgeted overhead costs using activity-based costing principles, b) calculate the budgeted overhead costs using absorption costing (absorb overhead using machine hours), and c) how can the company reduce the ABC for Product XX:

1. ___________________
2. ___________________
3. ___________________

Customer	AAA	BBB
Component Type	A999	B999
Contract Value ($)	$27,000	$100,000
Contract Quantity	1,000 unit	2,000 unit
Material cost/unit	$15	$20
Moulding time/batch	5 hours	7.5 hours
Batch size	100 units	50 units

Activity	Cost Driver	Cost Driver Volume/Yr	Cost Pool
Purchasing	Purchase orders	1,500	$75,000
Setting	Batches produced	2,800	$112,000
Materials handling	Materials movements	8,000	$96,000
Inspection	Batches produced	2,800	$70,000
Machining costs	Machine hours	50,000	$150,000

Purchase orders	25
Output	15,000 units
Production batch size	100 units
Materials movements per batch	6
Machine hours per unit	0.1 Company XYZ has 6 standard products from stainless steel and brass. The company’s most popular product is Product XX. The information below shows Product XX’s data for next year’s budget. Using this information, a) calculate the budgeted overhead costs using activity-based costing principles, b) calculate the budgeted overhead costs using absorption costing (absorb overhead using machine hours), and c) how can the company reduce the ABC for Product XX: ___________________ ___________________ ___________________ Customer AAA BBB Component Type A999 B999 Contract Value ($) $27,000 $100,000 Contract Quantity 1,000 unit 2,000 unit Material cost/unit $15 $20 Moulding time/batch 5 hours 7.5 hours Batch size 100 units 50 units Activity Cost Driver Cost Driver Volume/Yr Cost Pool Purchasing Purchase orders 1,500 $75,000 Setting Batches produced 2,800 $112,000 Materials handling Materials movements 8,000 $96,000 Inspection Batches produced 2,800 $70,000 Machining costs Machine hours 50,000 $150,000 Purchase orders 25 Output 15,000 units Production batch size 100 units Materials movements per batch 6 Machine hours per unit 0.1

Answer 1