Solution-Compare the total annual costs of product x

Compare the total annual costs of product x

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Reference no: EM13512988

Alfred Autoparts, Inc., previously used a cost system that allocated all factory overhead costs to products based on 350 percent of direct labor cost. The company has just implemented an ABC system that traces indirect costs to products based on consumption of major activities as indicated below. Compare the total annual costs of Product X using both the traditional volume-based and the new ABC systems.

Annual Cost Driver

Product X Cost

Activity

Quantity

cost

Driver Consumption

Labor

Machining

Setup

Production order

Material handling

Parts administration

$300,000

20,000 hours

10,000 hours

2,000 orders

1,000 requisitions

12,000 parts

$ 30,000

$500,000

$100,000

$200,000

$ 20,000

$480,000

$10,000

800 hours

100 hours

12 orders

5 requisitions

18 parts

Reference no: EM13512988

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Compare the total annual costs of product x

Reference no: EM13512988

Reference no: EM13512988

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