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Accounting Question No ABC1 On Activity-Based Costing
Published by slang November 23rd, 2007 in Activity-Based CostingCompany XYZ has 2 fixed price contract for 2 different customers.
The company has enough capacity for both contracts but
is uncertain whether they will be profitable.
Data as follows:
|
Customer |
AAA |
BBB |
|
Component Type |
A999 |
B999 |
|
Contract Value($) |
$27,000 |
$100,000 |
|
Contract Quantity |
1,000unit |
2,000units |
|
Material cost/unit |
$15 |
$20 |
|
Moulding time/batch |
5hours |
7.5hours |
|
Batch Size |
100units |
50units |
Annual Budgeted overheads as follows:
|
Activity |
Cost Driver |
Cost driver volume/yr |
Cost pool |
|
Moulding |
Moulding hours |
2,000 |
$150,000 |
|
Inspection |
Batches |
150 |
$75,000 |
|
Production Management |
Contracts |
20 |
$125,000 |
Required:
(a) Calculate the activity based costs and profits for each contract
(b) Calculate the profit for each job using Absorption costing. Absorb overheads using moulding hours.
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