## Answers

**Answer:**

1.

V-1 | V-2 | ||

a. | Using current costing system | $ 9.55 | $ 19.1 |

b. | Using proposed ABC system | $ 9.15 | $ 23.1 |

a.

Unit cost: | |||

V-1 | V-2 | ||

Direct Material | $ 2.00 | $ 4.00 | |

Overhead (include labor) | $ 7.55 | $ 15.1 | |

(7.55*1) | (7.55*2) | ||

Unit cost | $ 9.55 | $ 19.1 |

Working :

V-1 | V-2 | Total | |||

Units produced | 10,000 | 1,000 | |||

Machine hour per unit | 1 | 2 | |||

Total Machine Hours | 10,000 | 2,000 | 12,000 | ||

Total Overheads | $ 90600 | ||||

Overheads per unit | $90600/12,000 | $ 7.55 | per MH |

b.

Unit cost: | |||

V-1 | V-2 | ||

Direct Material | $ 2.00 | $ 4.00 | |

Overhead (include labor) | $ 7.15 | $ 19.1 | |

Unit cost | $ 9.15 | $ 23.1 |

Working :

a | b | a+b=c | d | d/c=e | f=e*a | g=e*b | ||

Activity | Activity Base | V-1 | V-2 | Total | Activity Cost | Rate per activity | V-1 | V-2 |

Machine Depreciation | Total Machine Hours | 10000 | 2000 | 12000 | $ 51000 | $ 4.25 | $ 42500 | $ 8500 |

Set up labor | No of Production Runs | 80 | 40 | 120 | $ 24000 | $ 200 | $ 16000 | $ 8000 |

Material Handling | Direct Material Cost | 20000 | 4000 | 24000 | $ 15600 | $ 0.65 | $ 13000 | $ 2600 |

$ 71500 | $ 19100 | |||||||

No of Units | 10000 | 1000 | ||||||

Overhead cost per unit | $ 7.15 | $ 19.1 |

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