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Ch 7 Collins Controls - Part Two

Ch 7 Collins Controls - Part Two - Cost Driver Valve A...

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Suppose Collins’ accountants have established the following activity cost pools and cost drivers to be used in an Activity Based Costing system. Activity Activity Cost Pool Amounts Cost Driver Machine setups $ 9,000 # of setups Engineering and design 210,000 engineering hours Material handling 22,000 lb. of material Quality control 92,000 # of inspections Machinery-related costs 612,000 machine hours Total $945,000 ======= Collins’ accountants estimated how much of each cost driver is consumed by each product line as follows. Collins is operating at capacity.
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Unformatted text preview: Cost Driver Valve A Valve B Total # of setups 20 100 120 engineering hours 1,000 6,000 7,000 lb. of material 170,000 50,000 220,000 # of inspections 150 650 800 machine hours 30,000 15,000 45,000 Calculate the unit product costs for each valve under the ABC system. Compare the unit product costs for each valve under the three overhead allocation methods in parts one and two of this problem. Which is a more accurate reflection of the true cost of each product? What are the possible outcomes of using a less accurate costing method?...
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