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Activity

BSA Company produces products AB and XY and is transitioning from a traditional costing system to Activity-Based Costing (ABC) due to significant overhead costs from setup and design activities. The document provides detailed production and cost data, including unit production, direct material costs, labor hours, and overhead allocations. It outlines the need for recalculating costs per unit under both costing systems to better understand product profitability.

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20 views1 page

Activity

BSA Company produces products AB and XY and is transitioning from a traditional costing system to Activity-Based Costing (ABC) due to significant overhead costs from setup and design activities. The document provides detailed production and cost data, including unit production, direct material costs, labor hours, and overhead allocations. It outlines the need for recalculating costs per unit under both costing systems to better understand product profitability.

Uploaded by

rodriguezdiane789
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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BSA Company produces two products, AB and XY, and uses a costing system in which all overhead is

accumulated in a single-cost.pool and allocated based on machine hours. In- House's management has
decided to implement ABC because a cost study has revealed significant amounts of overhead cost
related to setup activity and design activity.

The number of setups and the number of design hours will be the activity drivers for the two new cost
pools, and machine hours will continue as the base for allocating the remaining overhead. Selected
information follows for In-House Company's operations:

AB XY Total

Unit produced................................................ 500 15,500 16,000

Direct Material Cost

Per unit................................................... P 200 P20

Total....................................................... 100,000 310,000 410,000

Machine labor hours.................................. 3,000 47,000 50,000

Direct labor cost......................................... 50,000 350,000 400,000

Setups......................................................... 120 80 200

Design hours.............................................. 6,000 4,000 10,000

Overhead:

Set-up related.................................................................................................................. 250,000

Design-related.................................................................................................................. 350,000

Others .............................................................................................................................. 900,000

Total overhead ............................................................................................................... 1,500,000

a. Calculate the total and per-unit costs reported for the two products by the existing traditional costing
system.

b. Calculate the total and per-unit costs reported for the two products by the ABC system.

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