82 costunit 842 842 4210 packaging and shipping

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Unformatted text preview: 0,000 20,000 4,000 $14.82 = Cost/Unit =$ 8.42 = 8.42 = 42.10 Packaging and Shipping Cost Pool Wang 2013 Board Overhead Mode I $ 250,000 Mode II 250,000 Mode III 250,000 × × × × % 4% 30% 66% ÷ ÷ ÷ ÷ Units 10,000 20,000 4,000 = Cost/Unit =$ 1.00 = 3.75 = 41.25 29 Product Cost from ABC These are the new product costs when Aerotech uses ABC. Mode I Direct materials $ 50.00 Direct labor 60.00 Machinery 28.20 Setup 0.02 Engineering 17.50 Facilities 12.90 Other 14.82 Total $ 183.44 Wang 2013 Mode II $ 90.00 80.00 35.25 0.04 15.75 17.20 23.57 $ 261.81 Mode III $ 20.00 40.00 56.40 0.50 52.50 8.60 212.85 $ 390.85 30 Distorted Product Costs Both original and ABC target selling prices are based on (Cost × 125%). Mode II $ 302.00 261.81 Mode III $ 126.00 390.85 Un de rest im ate Traditional costing ABC costing Mode I $ 209.00 183.44 Co mp an y inc ur re da los t un de r tra dit ion al sys te Original target selling price ABC target selling price 261.25 229.30 377.50 327.26 157.50 488.56 The selling price of Mode I and II reduced and the selling price for Mode III increased significantly. [$209.00 × 1.25] Wang 2013 [$183.44 × 1.25] 31 Distorted Product Costs Can you identify any problems Aerotech is likely to face as a result of this distortion? Mode I Traditional costing $ 209.00 ABC costing 183.44 Cost distortion per unit 25.56 Units produced 10,000 Total cost distortion 255,600 Mode II $ 302.00 261.81 40.19 20,000 803,800 Mode III $ 126.00 390.85 (264.85) 4,000 (1,059,400) Traditional costing understates the cost of complex, low volume products. Wang 2013 32...
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This document was uploaded on 03/06/2014.

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