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Calculate activity-based costs and profits for each contract

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Reference no: EM132614696

Company XYZ has two fixed price contracts for two different clients. The company has enough capacity for both contracts but is uncertain whether they will be profitable.

Data as follows:

Customer                               AAA                     BBB

Component Type                  A 999                 B 999

Contract Value ($)              $27,000            $100,000

Contract Quantity                1,000 units           2,000 units

Material cost/unit                       $15                   $20

Molding time/batch                     5 hours           7.5 hours

Batch size                                   100 units          50 units

Annual Budgeted overheads as follows:

Activity                      Cost driver              Cost driver volume/year

Cost Pool                 Molding              Molding hours    2,000        $150,000

Inspection               Batches                  150                $75,000

Production Mgmt       Contracts               20                $125,000

Required:

Question 1: Calculate the activity-based costs and profits for each contract.

Reference no: EM132614696

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