Excel Assignment: Activity Based Costing
This exercise will deal with the costing of a product using a predetermined overhead rate and Activity Based Costing (ABC). Please note the different results from using the different methods.
The Sample Company wants to compare the results from the use of a predetermined overhead rate versus Activity Based Costing (ABC). The following are the estimated costs:
| Estimated manufacturing overhead | $1,000,000.00 | ||||
| Estimated direct labor hours (DLH) | 40,000 | ||||
| Predetermined overhead rate (per DLH) | $25.00 | ||||
| Mono-Relay | Bi-Relay | ||||
| Time to make one unit (hours) | 0.75 | 1 | |||
| Estimated units produced | 40,000 | 10,000 | |||
| Estimated total DLH | 30,000 | 10,000 | |||
| Direct materials cost per unit | $35.00 | $48.00 | |||
| Direct labor cost per unit (at $12 per DLH) | $9.00 | $12.00 | |||
| Estimated Overhead | Expected Activity | ||||
| Maintaining parts inventory | $180,000.00 | 225 | |||
| Processing purchase orders | $90,000.00 | 1000 | |||
| Quality control | $230,000.00 | 5750 | |||
| Machine-related | $500,000.00 | 10,000 | |||
| Total estimated overhead | $1,000,000.00 | ||||
| Expected Activity Mono-relay | Expected Activity Bi-Relay | Total Activity | |||
| Maintaining parts inventory | 75 | 150 | 225 | ||
| Processing purchase orders | 800 | 200 | 1,000 | ||
| Quality control | 2,500 | 3,250 | 5,750 | ||
| Machine related | 4,000 | 6,000 | 10,000 |
Compute the direct material, direct labor, overhead and total unit cost using the following:
- Predetermined overhead rate
- Activity Based Costing (ABC)
Please use the following Excel template: Week 8 ABC Template
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