Company X is a manufacturing company. His two products manufactured for the company, the C1 and the T1, appear to be unprofitable despite the company’s high sales volumes. Upon further analysis of the numbers, the finance chief noted that overhead as a percentage of total costs has increased over the past five years. His CEO at the company recently heard about a new method of costing products that uses activity-based costing to allocate overhead costs. The company currently allocates a total company overhead of EUR 2,400,000 based on a preset overhead rate based on total machine hours. The CEO wants to launch a project that allocates these overheads based on activity. As a first attempt, it was decided to use activity-based costing to distribute the overhead costs over the two products C1 and T1.
The following information was provided for production work:
|Set up||600,000||Number of set up hours||8,000|
|Maintenance||400,000||Number of Machine hours||200,000|
|Quality Inspection||800,000||Number of inspections||200,000|
|Assembly||600,000||Number of Labour hours||100,000|
Here are the unit prices for the two products
Activity usage information for each product is below
|Direct labour hours per unit||15||25|
|Machine hours per unit||90||30|
|Set up hours per unit||2||3|
Provide the following information:
Use the calculator to display the unit price of C1 and T1 in the traditional way and add a 60% markup to calculate the selling price for each. (Assuming machine time is used to allocate overhead costs.) (10 points)
Using activity-based costing to display unit prices for C1 and T1 and add a 50% markup to calculate the selling price. in any case. (25 points)
Provide a note to the manager explaining the differences between activity-based costing and traditional flat-rate overheads. It compares the results of both overhead allocation methods and recommends which overhead allocation method to use. Please support your answer with a reason. (15 marks)
Company Y is a subsidiary of the company The following budget information is available:
|Direct Material||€10 Per unit|
|Direct Labour||€15 per unit|
|Variable production Overhead||€3 per unit|
Fixed production overhead of €2,000 per month, based on budgeted production The calculated monthly absorbed quantity is 1,000 units.
Fixed sales and distribution costs are budgeted at €2,500 per month.
Fixed costs are assumed to be evenly distributed throughout the year.
The sales price is planned at 70 euros per piece.
Actual costs and selling prices are in line with the budget for the first two months of production.
There was no starting stock. July.
The next dates are in 2022 he’s July and he’s August.
Create a schedule that calculates opening and closing inventories. (5 points)
Produce an income statement using the total cost accounting for July and August. (15 marks)
Produce income statement with marginal costing (variable) for July and August. (15 points)
Adjust the difference between the variable cost profit and the absorption cost profit. (5 pts)
Explain the discussion of absorption costing and variable (marginal) costing. (10 points)
Select your paper details and see how much our professional writing services will cost.
Our custom human-written papers from top essay writers are always free from plagiarism.
Your data and payment info stay secured every time you get our help from an essay writer.
Your money is safe with us. If your plans change, you can get it sent back to your card.
Check out some essay pieces from our best essay writers before your place an order. They will help you better understand what our service can do for you.
We offer more than just hand-crafted papers customized for you. Here are more of our greatest perks.