A company is changing its costing system from traditional absorption costing based on labour hours to Activity Based Costing. It has overheads of $156,000 which are related to taking material deliveries. The delivery information about each product is below. Product: X Y Z Total units required 1,000 2,000 3,000 Delivery size 200 400 1,000 Total labour costs are $360,000 for 45,000 hours. Each unit of each product takes the same number of direct hours. Assuming that the company uses the number of deliveries as its cost driver, what is the increase or decrease in unit costs for Z arising from the change from Absorption Costing to Activity Based Costing?
A、Decrease of $14 per unit
B、Increase of $14 per unit
C、Decrease of $30 per unit
D、Increase of $30 per unit
A、Decrease of $14 per unit
B、Increase of $14 per unit
C、Decrease of $30 per unit
D、Increase of $30 per unit
【参考答案及解析】
Absorption costing Since the time per unit is the same for each product, the overheads per unit will also be the same. $156,000 ÷ 6,000 units = $26 Activity based costing Number of deliveries for X (1,000/200) 5 Number of deliveries for Y (2,000/400) 5 Number of deliveries for Z (3,000/1,000) 3 Total 13 Cost per delivery = $156,000/13 = $12,000 Cost per unit of Z = ($12,000/3,000 units) × 3 deliveries = $12 Decrease = $26 – $12 = $14.
Absorption costing Since the time per unit is the same for each product, the overheads per unit will also be the same. $156,000 ÷ 6,000 units = $26 Activity based costing Number of deliveries for X (1,000/200) 5 Number of deliveries for Y (2,000/400) 5 Number of deliveries for Z (3,000/1,000) 3 Total 13 Cost per delivery = $156,000/13 = $12,000 Cost per unit of Z = ($12,000/3,000 units) × 3 deliveries = $12 Decrease = $26 – $12 = $14.