Cost Accounting Tutorial 10 - Problem
Cost Accounting Tutorial 10 - Problem
Mathematical Financial
Annual production in units 50,000 100,000
Direct material costs $150,000 $300,000
Direct manufacturing labor costs $50,000 $100,000
Direct manufacturing labor-hours 2,500 5,000
Machine-hours 25,000 50,000
Number of production runs 50 50
Inspection hours 1,000 500
Instructions:
1. Choose a cost driver for each overhead cost pool and calculate the manufacturing
overhead cost per unit for each product.
2. Compute the manufacturing cost per unit for each product.
Problem 2
Braun Corporation is a manufacturing company, which process three kinds of leather related
product, which are bags, purse, and wallet. Right now, the company has difficulties in
determining the profitability of which of the product, and therefore is considering implementing
Activity Based Costing system. After several interview and research, the company determines
seven activities which are: (1) Scheduling production, (2) Run purchasing materials, (3) Moving
materials, (4) Set-up machine, (5) Making product, (6) Inspecting product, (7) Packaging
product.
Direct cost to produce one unit of each of the product are: (in Rp.)
Bags Purse Wallet
DM 9,000 / bag 8.000 / purse 10.000 / wallet
DL 2,000 / bag 2.500 / purse 2.200 / wallet
The company already performed the first stage of ABC, which was allocating the indirect cost to
each of the activities. Now the company is trying to do the second stage allocation. Results of the
first stage allocation were stated bellow: (in rupiah)
Scheduling Production
Run 37.482.500,00
Purchasing Materials 24.120.000,00
Moving Materials 71.981.250,00
Set-up the Machine 39.878.750,00
Making Product 580.530.000,00
Inspecting Product 92.187.500,00
Packaging products 41.820.000,00
The activity drivers (cost drivers) to allocate each of the activities to products are listed bellow.
(you have to match the activity drivers listed – one driver for one action only)
1. Calculate the profitability of each product using the traditional method, assuming that all
of the indirect costs will be allocated using machine hours
2. Calculate the profitability of each product using the ABC method