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Mathias Company 100000

Price: $1.99


E21-17 Mathias Company manufactures a number of specialized machine parts. Part Bunkka-22
uses $35 of direct materials and $15 of direct labor per unit.
Mathias’ 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.
Mathias is considering adopting activity-based costing. The cost drivers are estimated at:
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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