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Questions:
- What are the costs of the products using the simplified or traditional overhead method?
- What are the costs of the products using the activity-based costing method?
- What are two benefits of the simplified or traditional method?
- What are two benefits of the activity-based costing method?
- What is the impact on pricing if Product 1 is desired by customers? Should changes be made?
Cost per Design Machine set up Machine operations Shipment set up Distribution Administration Factory overhead Overhead Costs Drivers 100,000 2 Engineers 60,000 2,000 Set-Up hours 120,000 10,000 Machine hours 25,000 500 Shipments 40,000 10 #trucks 30,000 5,000 Factory hours 375,000 5,000 Factory hours Driver 50,000 30 12 50 4,000 6 75 Drivers Product 1 Product 2 1 1 Engineers 1,500 500 Set-Up hours 6,500 3,500 Machine hours 300 200 Shipments 7 3 # trucks 2,500 2,500 Factory hours 200,000 100,000 TBD 30% Product Costs 250,000 Direct Material 75,000 Direct Labour TBD Overhead 15% Margin for Cost Plus Pricing
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