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28 Sep 2018
In cost Accounting if Budgeted cost is less than Actual cost what it called over costed or under cost?
what is differents between current method and Activity based method
In cost Accounting if Budgeted cost is less than Actual cost what it called over costed or under cost?
what is differents between current method and Activity based method
Bunny GreenfelderLv2
29 Sep 2018
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Pete's PCs, Inc. budgeted manufacturing overhead costs for theyear are:
| Type of Cost | Cost Pools |
| Electric Power | $2,500,000 |
| Inspection | $1,500,000 |
| Budgeted overhead costs | $4,000,000 |
Under a traditional cost system, the company estimated the budgetedcapacity for machine hours to be 40,000 hours. Bill is consideringchanging to an activity-based cost system. Thus, the followingestimates were provided:
| Type of Cost | Activity-based cost drivers |
| Electric power | 50,000 kilowatt hours |
| Inspection | 10,000 inspections |
The following information was provided concerning the production of1,000 units of model #1040:
| Direct materials cost | $50,000 |
| Direct labor costs | $75,000 |
| Machine hours | 10,000 |
| Direct labor hours | 5,000 |
| Electric power - kilowatt hours | 20,000 |
| No. of inspections | 1,000 |
REQUIRED:
| a. | What are the manufacturing costs per PC under the traditionalcost system that applies manufacturing overhead costs based onmachine hours? |
| b. | What are the manufacturing costs per PC if the activity-basedcosting system is implemented? |
| c. | Explain the difference between activity-based costing andconventional costing methods, and how ABC might enhance thefinancial reporting of Pete's PCs, Inc. |
