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Homework answers / question archive / An different method of assigning costs is activity-based costing
An different method of assigning costs is activity-based costing. The major activity for the production of both Processor01 and Android01 is component assembly. There will be a total of 125,000 assemblies per year for the production of 500 units of Processor01 and 300 units of Android01 at a total cost of $25 million. Each unit of Android01 will require 180 assemblies. The remaining cost for the production of Android01 is for components, at $25,000 per unit.
What would be the cost per unit of producing Android01 using activity-based costing?
Calculating the cost per unit of producing assemblies:
Cost per unit of producing assemblies=Total assemblies cost Total assemblies =$25,000,000125,000=$200 per unitCost per unit of producing assemblies=Total assemblies cost Total assemblies =$25,000,000125,000=$200 per unit
Cost of producing Android01=(Cost per unit of producing assemblies × Android01 assemblies)+Remaining Cost of Andorid01=($200×180)+36,000=$61,000Cost of producing Android01=(Cost per unit of producing assemblies × Android01 assemblies)+Remaining Cost of Andorid01=($200×180)+36,000=$61,000
Cost is said to the sum of money, which is incurred by an organization in the manufacturing of products and services. Types of costs are fixed and variable cost, which is incurred in order to accomplish the organization's goals.
