29 Jun Question Problem 5-13A Comparing an ABC system with a traditional costing system
Question
Problem 5-13A Comparing an ABC system with a traditional costing system
Peck Electronics produces video games in three market categories, commercial, home, and miniature. Peck has traditionally allocated overhead costs to the three products using the companywide allocation base of direct labor hours. The company recently implemented an ABC system when it installed computer-controlled assembly stations that rendered the traditional costing system ineffective. In implementing the ABC System, the company identified the following activity cost pools and cost drivers.
Category Total Pooled Cost Types of Costs Cost Driver
Unit $720,000 Indirect labor wages, supplies, depreciation, machine maintenance Machines hours
Batch 388,800 Materials handling, inventory storage, labor for setups, packaging, labeling and shipping, scheduling Number of production orders
Product
211,200 Research and development Time spent by research department
Facility 600,000 Rent, utilities, maintenance, admin. Salaries, security Square footage
Commercial Home Miniature Total
Direct materials cost $36/unit $24/unit $30/unit ___
Direct labor cost $14.40/hour $14.40/hour $18/hour ___
Number of labor hours 6,000 12,000 2,000 20,000
Number of machine hours 10,000 45,000 25,000 80,000
Number of production orders 200 2,000 800 3,000
Research and development time 10% 20% 70% 100%
Number of units 15,000 45,000 14,000 74,000
Square footage 20,000 50,000 30,000 100,000
Required
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