Accounting

Part I: Activity-Based Costing

1. Calculate the unit manufacturing costs for simple desk and corner workstation under ABC system.

Table1: Calculation of the Indirect Costs Allocated to the Products |

Activity | Total activity cost(1) | Practical capacity(2) | Cost driver rate(3)= (1)/(2) | simple desk | corner workstation |

| | | | Usage(4) | Costs(3)*(4) | Usage (5) | Costs(3)*(5) |

Design and plan the production process | $262,500 | 700 | $375 | 40 | 15,000 | 120 | $45,000 |

Make layered panels | $861,500 | 172,300 | $5 | 8520 | 42,600 | 17325 | $86,625 |

Handle material | $88,000 | 440 | $200 | 60 | 12,000 | 45 | $9,000 |

Setup machine | $40,000 | 1,600 | $25 | 120 | 3,000 | 180 | $4,500 |

Run machine | $601,250 | 23,125 | $26 | 2400 | 62,400 | 3150 | $81,900 |

Inspect and package the product | $368,000 | 9,200 | $40 | 1200 | 48,000 | 450 | $18,000 |

Table2: Product Profitability Analysis (ABC System) |

| Simple desk | Corner Workstation |

Direct material costs | $115,200 | $115,200 |

Direct manufacturing labor costs | 10800 | 10800 |

Manufacturing overheads: | | |

Design and plan the production process | 15,000 | 45,000 |

Make layered panels | 42,600 | 86,625 |

Handle material | 12,000 | 9,000 |

Setup machine | 3,000 | 4,500 |

Run machine | 62,400 | 81,900 |

Inspect and package the product | 48,000 | 18,000 |

Full manufacturing costs | 309,000 | 476,775 |

Total units produced | 1200 | 450 |

Manufacturing costs per unit | 257.50 | 1,059.50 |

Table 3: Manufacturing Costs per Unit |

| Simple desk | Corner Workstation |

Simple costing system | $315 | $935 |

ABC system | $257.50 | $1059.50 |

Under ABC system, the unit manufacturing cost of simple desk is $257.50, which is lower than the cost $315 under simple costing system. On the contrary, the unit manufacturing cost of corner workstation under ABC system is $1059.50, which is higher than the cost $935 under...