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E18-19 Refer to Exercise 18-17. For 2013, Elton’s managers

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E18-19 Using activity-based costing to make decisions [15–20 min]
Refer to Exercise 18-17. For 2013, Elton’s managers have decided to use the same
indirect manufacturing costs per wheel rim that they computed in 2012. In addition
to the unit indirect manufacturing costs, the following data are budgeted for the
company’s standard and deluxe models for 2013:

Sales price 800.00 940.00
Direct materials 31.00 50.00
Direct labor 45.00 56.00

Because of limited machine-hour capacity, Elton can produce either 2,000 standard
rims or 2,000 deluxe rims.

Requirements
1. If Elton’s managers rely on the ABC unit cost data computed in E18-17, which
model will they produce? Carry each cost to the nearest cent. (Ignore operating
expenses for this calculation.)
2. If the managers rely on the single-allocation-base cost data, which model will
they produce?
3. Which course of action will yield more income for Elton?

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