ACIS 2116 Chapter 6 Part 2 with blanks

ACIS 2116 Chapter 6 Part 2 with blanks - Activity-Based...

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1 Activity-Based Costing ACIS 2116 Chapter Six – Part 2
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2 ABC Costing Example Continued Assume that a batch of Hokie Paraphernalia products has the following specifications: Direct Labor Hours 10 Purchase Orders 1 Shipments received 4 Machine Setups 2 Inspections 2
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3 ABC Costing Example How much overhead would be allocated to the batch if the traditional overhead allocation based on direct labor hours is used? 10 DLH * $115 per DLH = $1,150
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4 ABC Costing Example How much overhead would be allocated to the batch if ABC Costing is used? Activity Amount Overhead Rate Overhead Allocated Purchase Orders 1 X 50.00 $ 50.00 $ Shipments received 4 X 6.25 $ 25.00 $ Machine Setups 2 X 122.22 $ 244.44 $ Inspections 2 X 26.67 $ 53.34 $ Total 372.78 $
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5 ABC versus Traditional Overhead Allocation When batch-level and product-level costs are present, ABC will usually shift costs from high volume products, produced in large batches, to low volume products produced in small batches. This cost shifting will usually have its greatest impact on the per unit cost of the low volume products.
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6 ABC versus Traditional Overhead Allocation For example, assume that a company
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ACIS 2116 Chapter 6 Part 2 with blanks - Activity-Based...

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