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Posted: May 15th, 2024
XYZ Company specializes in servers for workgroup, e-commerce and ERP applications in Yanbu. The companyâs original job order costing has two direct cost categories; direct material and direct labor. Overhead is allocated to the jobs at the single rate of $22 per direct labor hour. A task force headed by the CEO recently designed ABC systems with four activities. The ABC system retains the current systemâs two direct cost categories. Thus, it budget only overhead cost for each activity as belowActivityAllocation BaseCost Allocation rateMaterial handlingNumber of parts$0.85Machine set upNumber of setup500AssemblingAssembling hour80ShippingNumber of shipment1,500XYZ Company has been awarded with two new contracts, which will produce Job A and Job B. budget relating to the two jobs are as follows:Job AJob BNumber of parts15,0002,000Number of setup64Number of assembling hour1,500200Number of shipment11Total direct labor hour8,000600Number of output unit10010Direct material cost$220,000$30,000Direct labor cost$160,000$12,000RequirementsCompute the product cost per unit for each job using original costing system (2 direct cost and single overhead allocation rate)Compute the product cost per unit using the ABC systemWhich costing method is more accurate assigns the cost of the resource consumed to produce them? Explain
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