Solution-Compute the unit manufacturing cost of each job

Compute the unit manufacturing cost of each job

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Reference no: EM133076315

Question - Taylor Inc. uses a volume-based costing system that applies overhead cost based on direct labor hours at $250 per direct labor hour. The company is considering adopting an activity-based costing system with the following data:

Activity Area	Cost Driver	Cost Driver Rate
Materials handling	# of parts	2.5
Machine runs	# of turns	0.6
Milling	# of machine hours	20.0
Grinding	# of parts	1.5
Testing	# of units tested	15.0

The two jobs processed in the month of June had the following characteristics:

	Job 101	Job 102
Direct material costs	$20,000	$60,000
Direct labor costs	$2,000	$30,000
# of direct labor hours	50	500
# of parts	1,000	3,000
# of turns	20,000	50,000
# of machine hours	150	1,000
# of units tested	20	250

Required -

a. Compute the unit manufacturing cost of each job under the firm's current volume-based costing system.

b. Compute the unit manufacturing cost of each job under the activity-based costing system.

c. Compare the unit manufacturing cost for Jobs A and B computed in requirements 1 and 2.

d. Why do the two cost systems differ in their total cost for each job?

e. Why might these differences be important to the Company?

Reference no: EM133076315

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Compute the unit manufacturing cost of each job

Reference no: EM133076315

Reference no: EM133076315

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