Q: What conclusions can you draw about the use of traditional costing versus ABC costing...
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Accounting
Q: What conclusions can you draw about the use of traditional costing versus ABC costing for the Blake Company? What recommendations do you have for the president?
Flops
Chops
Sales Price per Unit
$200
$600
Direct Materials per Unit
$100
$300
Direct Labor Cost per Unit
$30
$50
Direct Labor Hours per Unit
2
6
Number of Units Produced
30,000
20,000
Traditional Costing System based
Flops
Chops
Total
Predetermined Variable overhead rate
$1,633,333
$3,266,667
$4,900,000
Traditional Costing System based
Flops
Chops
Unit Product Costs
$214.44
$763
Contribution Margin per Unit
-$14.44
-$163
ABC costing system based
Activity Cost Pool
Estimated Overhead Cost
Expected Activity Level
Predetermined Overhead Rate
Setups
$860,000
200
setups
$4,300
Scrap
400,000
500
units
$800
Testing
300,000
5,000
tests
$60
Machine Related
2,440,000
100,000
machine related
$24
Total
$4,000,000
ABC costing based
Direct Material per Unit
$100
$300
Direct Labor per Unit
$60
$300
Manufacturing Overhead
$27
$160
Production Cost
$187
$760
Contribution Margin per Unit
$13
-$160
Answer & Explanation
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