Henriksen AS manufactures and sells packaging machines. It recently used an activity- based approach to refine the job-costing system at its Vejle plant. The resulting job-costing system has one direct-cost category (direct materials) and four indirect manufacturing cost pools. These four indirect-cost pools and their allocation bases were chosen by a team of product designers, manufacturing personnel and marketing personnel:
| Indirect manufacturing cost pool | Cost-allocation base | Budgeted cost- allocation rate |
| 1. Materials handling
2. Machining 3. Assembly 4. Inspection |
Component parts Machine-hours Assembly-line-hours Inspection-hours | DKr 8 per part DKr 68 per hour DKr 75 per hour DKr 104 per hour |
Langeland recently purchased 50 can-packaging machines from Henriksen AS. Each machine has direct materials costs of DKr 3000, requires 50 component parts, 12 machine- hours, 15 assembly-hours and 4 inspection-hours.
Henriksen’s prior costing system had one direct-cost category (direct materials) and one indirect-cost category (manufacturing overhead, allocated using assembly-hours).
Required
Calculate the unit manufacturing costs (using ABC) of each machine and the total man- ufacturing cost of the Langeland job.
Solution
Calculation of manufacturing cost as per ABC method.
| Costs | Amount |
| Direct material | ………………….. |
| Overheads:
Material handling: Machining: ……………. Assembly: 56,250 Inspection: 20,800 |
…………………. |
| Total Cost | ………………. |
| ………………………….. | …………………. |
| Cost per unit | 5,757.00 |
For a custom-written paper, place your order now
What We Offer:
• On-time delivery guarantee
• PhD-level professionals
• Automatic plagiarism check
• 100% money-back guarantee
• 100% Privacy and Confidentiality
• High Quality custom-written papers