Solution-Why might managers favor abc system

Why might managers favor abc system

Reference no: EM13552700

Product costing in an ABC system The August Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in handheld video phones. Consider the following data regarding component T24:

Direct materials cost	$82.00
Direct labor cost	$23.00
Activity costs allocated	?
Manufacturing product cost	$?

The activities required to build the component follow:

		Cost Allocated
Activity	Allocation Base	to Each Unit
Start station	Number of raw component chasis	6 * $ 1.60	=	$9.60
Dip insertion	Number of dip insertions	? * $ 0.20	=	5.20
Manual insertion	Number of manual insertions	10 * $ 0.40	=	?
Wave solder	Number of components soldered	6 * $ 1.70	=	10.20
Backload	Number of backload insertions	8 * $ ?	=	6.40
Test	Testing hours	0.43 * $ 60.00	=	?
Defect analysis	Defect analysis hours	0.13* $ ?	=	$5.20
Total indirect activity costs				$?

Requirements

1. Complete the missing items for the two tables.

2. Why might managers favor this ABC system instead of August's older system, which allocated all conversion costs on the basis of direct labor?

Reference no: EM13552700

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Why might managers favor abc system

Reference no: EM13552700

Reference no: EM13552700

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