Activity Based Costing (ABC): ABC costing method is generally used to allocate the overhead costs to the product using activity rates differently for each activity. Unlike traditional method, the ABC costing method does not use the plant wide overhead rate, rather it used different allocation rate for different production activity. To calculate: The full manufacturing cost per unit for Deluxe

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Chapter 4, Problem 7MC

To determine

Concept introduction:

Activity Based Costing (ABC):

ABC costing method is generally used to allocate the overhead costs to the product using activity rates differently for each activity. Unlike traditional method, the ABC costing method does not use the plant wide overhead rate, rather it used different allocation rate for different production activity.

To calculate:

The full manufacturing cost per unit for Deluxe

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Required: 1. Using the five most expensive activities, calculate the overhead cost assigned to each prod-uct. Assume that the costs of the other activities are assigned in proportion to the cost of the five activities.2. Calculate the error relative to the fully specified ABC product cost and comment on the outcome.3. What if activities 1, 2, 5, and 8 each had a cost of $650,000 and the remaining activities hada cost of $50,000? Calculate the cost assigned to Wafer A by a fully specified ABC systemand then by an approximately relevant ABC approach. Comment on the implications forthe approximately relevant approach.

For each of the four situations, calculate the cost basis per device based on the information shown above. (Round intermediate calculations and final answers to 2 decimal places.) A. Only the differential production costs could be considered as the cost basis. B. The total cost per device for normal production of 60,000 devices could be used as the cost basis. C. The total cost per device for productions of 66,000 devices, excluding marketing costs, could be used as the cost basis. D. The total cost per device for production of 66,000 devices, including marketing costs, could be used as the cost basis.

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