Zhedong plans to use activity-based costing to determine its product costs. The total factory overhead cost is as follows Department Factory Overhead                                                                  ​​​​​​​Production Support                  ¥1,225,000 Production (factory overhead only)  175,000 Total cost                               ¥1,400,000 Production Support Department Budgeted Activity Cost Setup                           ¥428,750 Production control           245,000 Quality control                183,750 Materials management      367,500 Total                         ¥1,225,000 And, Zhedong estimated the following activity-base usage and units produced for each of its three products:(image below) Instructions 1. Determine the factory overhead cost per unit for the LCD TV, tablet, and smartphone under the single plantwide factory overhead rate method. Use direct labor hours as the activity base.  2. Determine the factory overhead cost per unit for the LCD TV, tablet, and smartphone under activity-based costing. Round your answers to two decimal places.  3. Which method provides more accurate product costing? Why

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Zhedong plans to use activity-based costing to determine its product costs. The total factory overhead cost is as follows

Department Factory Overhead                                                                 

​​​​​​​Production Support                  ¥1,225,000

Production (factory overhead only)  175,000

Total cost                               ¥1,400,000

Production Support Department Budgeted Activity Cost

Setup                           ¥428,750

Production control           245,000

Quality control                183,750

Materials management      367,500

Total                         ¥1,225,000

And, Zhedong estimated the following activity-base usage and units produced for each of its three products:(image below)

Instructions

1. Determine the factory overhead cost per unit for the LCD TV, tablet, and smartphone under the single plantwide factory overhead rate method. Use direct labor hours as the activity base. 

2. Determine the factory overhead cost per unit for the LCD TV, tablet, and smartphone under activity-based costing. Round your answers to two decimal places. 

3. Which method provides more accurate product costing? Why? 

 

Number of
Direct
Production
Material
Products
Units
Labor Hrs.
Setups
Orders
Inspections
Requisitions
LCD TV.
10,000
25,000
80
80
35
320
Tablet....
2,000
10,000
40
40
40
400
Smartphone.
50,000
140,000
5
30
Total cost
62,000
175,000
125
125
75
750
Transcribed Image Text:Number of Direct Production Material Products Units Labor Hrs. Setups Orders Inspections Requisitions LCD TV. 10,000 25,000 80 80 35 320 Tablet.... 2,000 10,000 40 40 40 400 Smartphone. 50,000 140,000 5 30 Total cost 62,000 175,000 125 125 75 750
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