Chicago Computing – Total Costs
Chicago Computing Corporation manufactures two remote Internet communication devices: Personal and DeLuxe. Below is the information relative to their costs:
|
Name of Pool |
Dollars in Pool |
No. of Drivers |
Driver |
|
Purchasing |
$1,000,000 |
10,000 |
Purch. Orders |
|
Soldering |
500,000 |
100,000 |
Inches |
|
General Factory |
250,000 |
40,000 |
Labor Hours |
|
$1,750,000 |
Labor rate is $20.00 per hour.
Following is information relative to the two products:
|
Description |
Personal |
DeLuxe |
|
Direct Material |
500,000 |
800,000 |
|
Number of Units |
10,000 |
5,000 |
|
Purchase Orders |
6,000 |
4,000 |
|
Inches |
50,000 |
50,000 |
|
Direct Labor Hours |
25,000 |
15,000 |
Required:
- Compute the total cost of making the personal device and the deluxe device using the single driver approach with labor hours being the cost driver. Also, compute the unit cost of each device.
- Compute the total cost of making the personal device and the deluxe device using the ABC approach. Also, compute the unit cost of each device.
- What are the three environmental factors that normally exist where a company is using ABC costing?
- Discuss some of the reasons firms have not adopted ABC costing.
