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*E21-15 Oakenfeld Company manufactures a number of specialized machine parts. Part

Price: $1.99


Oakenfeld Company manufactures a number of specialized machine parts. Part
Bunkka-22 uses $35 of direct materials and $15 of direct labor per unit.

Oakenfeld’s estimated manufacturing overhead is as follows:


Materials handling   100,000
Machining   200,000
Factory supervision   150,000
Total   450,000

Overhead is applied based on direct labor costs, which were estimated at $200,000.
Oakenfeld is considering adopting activity-based costing.The cost drivers are estimated at:


Activity  Cost driver  Expected use 
Materials handling  Weight of materials  50,000 pounds 
Machining  Machine hours  20,000 hours 
Factory supervision  Direct labor hours  12,000 hours 

Instructions
(a) Compute the cost of 1,000 units of Bunkka-22 using the current traditional costing system.
(b) Compute the cost of 1,000 units of Bunkka-22 using the proposed activity-based costing system.
Assume the 1,000 units use 2,500 pounds of materials, 500 machine hours, and 1,000
direct labor hours.

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