### Allocating Costs Using ABCThis example demonstrates an Activity-Based Costing (ABC) system with three cost pools. Below is a breakdown of costs and calculations for products A and B.#### Table 1: Cost Pool Details| Cost Pool | Total Cost in the Pool | Number of Cost Driver Units ||-----------|------------------------|-----------------------------|| **Pool 1** | $80,000 | 4,000 DL$ for Product A, 6,000 DL$ for Product B (Total: 10,000 DL$) || **Pool 2** | $60,000 | 20 setups for Product A, 30 setups for Product B (Total: 50 setups) || **Pool 3** | $40,000 | 50 hours for Product A, 150 hours for Product B (Total: 200 hours) |**DL$** stands for Direct Labor Dollars.#### Table 2: Activity Rates and Allocated CostsThe task is to compute the activity rates and allocated costs for Products A and B.| Cost Pool | Activity Rate | Allocated Costs for Product A | Allocated Costs for Product B ||-----------|---------------|------------------------------|------------------------------|| **Pool 1** | $ ___ per DL$ | $ ___ | $ ___ || **Pool 2** | $ ___ per setup | $ ___ | $ ___ || **Pool 3** | $ ___ per hour | $ ___ | $ ___ |#### Total Allocated Costs for Each Product- Total Allocated Cost for Product A: $ ___- Total Allocated Cost for Product B: $ ___### Explanation of the DiagramThe diagram consists of two tables. The first table lists total costs in three distinct pools along with the number of cost driver units broken down by product. The second table is intended for computing and inputting the respective activity rates and allocated costs based on cost driver units such as direct labor dollars, setups, and hours.

on 2: Allocating costs using ABC ve an ABC system with three pools 123 total cost in the pool $80,000 $60,000 $40,000 product A 4,000 DL$ 20 setups 50 hours number of cost driver units product B 6,000 DL$ 30 setups 150 hours total 10,000 DL 50 setups 200 hour:

on 2: Allocating costs using ABC ve an ABC system with three pools 123 total cost in the pool $80,000 $60,000 $40,000 product A 4,000 DL$ 20 setups 50 hours number of cost driver units product B 6,000 DL$ 30 setups 150 hours total 10,000 DL 50 setups 200 hour:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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eBook Show Me How Question Content Area CVP with Activity-Based Costing Busy-Bee Baking Company produces a variety of breads. The average price of a loaf of bread is $1. Costs are as follows: Cost Driver Unit VariableCost Level of CostDriver Units sold $0.65 — Setups $300 150 Maintenance hours $15 2,500 Other data: Total fixed costs (traditional) $140,000 Total fixed costs (ABC) 57,500 Required: 1. Compute the break-even point in units using conventional analysis. $400000 2. Compute the break-even point in units using activity-based analysis. $400000 3. Suppose that Busy-Bee could reduce the setup cost by $100 per setup and could reduce the number of maintenance hours needed to 1,000. How many units must be sold to break even in this case? Round your answer up to the next higher whole unit (for example, 50.3 units rounds to 51).
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