Broadening Your Perspective 17-2
Broadening Your Perspective 17-2 Alison Eades ACC/561 December 15, 2014 Jason See
Broadening Your Perspective
This exercise is to help further explain Activity Based Costing and how it can help the Manufacturing Company keep its cost at the correct level. “An Activity Based Costing system recognizes relationships between cost, activities, and products, and through this relationship assigns indirect cost to products less arbitrarily than traditional methods...” (Investopedia, 2014)
1. Compute the activity based overhead rate for each activity cost pool.
Activity based overhead is determined by dividing estimated overhead by the estimated cost drivers.
Activities Estimated Overhead Cost Drivers …show more content…
How much cost would be charged to an in-house manufacturing department that consumed 1,800 hours of market analysis time was provided 280 designs relating to 10 products, and requested 92 engineering test?
The total charged to an in-house manufacturing department would be $1,046,800. This amount is determined by multiplying the overhead rates of each activity to the amount consumed for that activity and added together in order to reach a total. (1800*70=126,000)(280*940=263,200)(10*40,000=400,000), (2,800*92=257,600).
3. How much cost would serve as the basis for pricing an R&D bid with an outside company on a contract that would consume 800 hours of analysis time, require 178 designs relating to 3 products, and result in 70 engineering tests?
$539,320 would serve as the basis for pricing an R&D bid with an outside company because that dollar amount is the breakeven point. (800*70=56,000)(178*940=167,320)(3*40,000=12,000)(70*2,800=196,000)
4. What is the benefit to Ideal Manufacturing of applying activity-based costing to its R&D activity for both in-house and outside charging
Broadening Your Perspective
This exercise is to help further explain Activity Based Costing and how it can help the Manufacturing Company keep its cost at the correct level. “An Activity Based Costing system recognizes relationships between cost, activities, and products, and through this relationship assigns indirect cost to products less arbitrarily than traditional methods...” (Investopedia, 2014)
1. Compute the activity based overhead rate for each activity cost pool.
Activity based overhead is determined by dividing estimated overhead by the estimated cost drivers.
Activities Estimated Overhead Cost Drivers …show more content…
How much cost would be charged to an in-house manufacturing department that consumed 1,800 hours of market analysis time was provided 280 designs relating to 10 products, and requested 92 engineering test?
The total charged to an in-house manufacturing department would be $1,046,800. This amount is determined by multiplying the overhead rates of each activity to the amount consumed for that activity and added together in order to reach a total. (1800*70=126,000)(280*940=263,200)(10*40,000=400,000), (2,800*92=257,600).
3. How much cost would serve as the basis for pricing an R&D bid with an outside company on a contract that would consume 800 hours of analysis time, require 178 designs relating to 3 products, and result in 70 engineering tests?
$539,320 would serve as the basis for pricing an R&D bid with an outside company because that dollar amount is the breakeven point. (800*70=56,000)(178*940=167,320)(3*40,000=12,000)(70*2,800=196,000)
4. What is the benefit to Ideal Manufacturing of applying activity-based costing to its R&D activity for both in-house and outside charging