Question: A Company manufactures smartphones. It makes two different models: A Model and the B Model. Data below.
|
A Model
|
B Model
|
|
Annual Production (units)
|
400,000
|
50,000
|
|
Direct labor hours per unit
|
0.25
|
0.50
|
|
Direct materials pounds per unit
|
0.05
|
0.10
|
|
Direct labor cost per unit
|
$6
|
$20
|
|
Direct materials cost per unit
|
$50
|
$90
|
|
Cost Pool
|
Cost
|
Cost Driver
|
A
Model
|
B
Model
|
|
Materials ordering
|
$2,000,000
|
# of purchase orders
|
18,000
|
2,000
|
|
Equipment setup
|
3,000,000
|
# of setups
|
900
|
100
|
|
Quality control
|
1,000,000
|
# of inspections
|
800
|
200
|
|
Total overhead costs
|
$6,000,000
|
|
|
|
Compute the total cost of one B Model if ABC principles are used to allocate overhead costs.
Compute the total cost of one B Model if all overhead costs are allocated based on pounds of direct material.