You are a manager at PopUp Company, who manufactures toaster ovens.  Your company produces two types of toaster ovens: basic and deluxe.  PopUp Company currently uses a traditional unit-based costing system, however, you feel strongly the company should switch to an activity-based costing system.  You believe this change would provide you more accurate costing information, which would allow for better strategic decision making.  You need to prepare a number of documents in order to convince the CFO to change the current cost management system used by your company.

Prepare a 3-page memo addressed to the CFO summarizing your findings (Please check the attached file), and why you believe the activity-based costing method gives you more useful information to make decisions for the company.  Include in the memo at least 4 ratios that you feel highlight your position that activity-based costing is more useful…Problem

PopUp Company produces two types of toasters, basic and deluxe. For the current period, the company reports the following data:

Basic Toaster Deluxe Toaster

Volume 20,000 units 5,000 units

Machine Hours 1,000 2,400

Batches 315 125

Engineering Modifications 20 50

Prime Costs $20,000 $30,000

Market Price $25 per unit $60 per unit

Additional Information Follows

Costs Driver

Engineering Support $15,900 Engineering Modifications

Electricity 25,000 Machine Hours

Setup costs 33,900 Batches

1) Compute the manufacturing cost per unit of each toaster using the current unit-based approach.

Under this system costs are assigned to the toasters on the basis of machine hours.

2) Compute the manufacturing cost per unit of each toaster using an activy-based costing approach

1) Manufacturing Cost Per Unit Of Each Toaster Using The Current Unit-Based Approach 2) Manufacturing Cost Per Unit Of Each Toaster Using An Activity-Based Costing Approach:

Total Overhead Costs Activities Cost Pool Cost Driver Cost Driver Quantity Cost Driver Rate

Engineering Support $15,900 Engineerong Support $15,900 Engineering Modifications 70 $227.14 per engineering modification

Electricity $25,000 Electricity $25,000 Machine Hours 3,400 $7.35 per machine hour

Setup Costs $33,900 Setup Costs $33,900 Batches 440 $77.05 per batch

$74,800

Item Cost Basic Toaster Cost Deluxe Toaster Cost

Total Machine Hours For Both Types Of Toasters

A. Prime Cost $20,000.00 $30,000.00

Basic Toaster 1000 Machine Hours B. Manufacturing Overhead Cost Driver Quantity Activity Based Cost Cost Driver Quantity Activity Based Cost

Deluxe Toaster 2400 Machine Hours Engineering Support ($227.14 per engineering modification) 20 $4,542.86 50 $11,357.14

3400 Electricity ($7.35 per machine hour) 1,000 $7,352.94 2,400 $17,647.06

Setup Costs ($77.05 per batch) 315 $24,269.32 125 $9,630.68

Overhead Absorption Rate Per Machine Hour Total Manufacturing Overhead $36,165.12 $38,634.88

C. Total Manufacturing Cost (A+B) $56,165.12 $68,634.88

Total overhead costs/Total machine hours for both types of toasters D. Total Number Of Units Produced 20,000 5,000

$74,800 E. Manufacturing Cost Per Unit (C/D) $2.81 $13.73

3400

$22 per machine hour

Manufacturing Cost Per Unit For Basic Toaster

Total manufacturing cost of Basic Toaster:

Prime Costs $20,000

Total Overhead Costs Allocated (1000 x $22) $22,000

$42,000

Manufacturing cost per unit = Total manufacturing cost/Number of units

Manufacturing cost per unit = $42,000

20,000

$2.10 per unit

Manufacturing Cost Per Unit For Deluxe Toaster

Total manufacturing cost of Deluxe Toaster:

Prime Costs $30,000

Total Overhead Costs Allocated (2,400 x $22) $52,800

$82,800

Manufacturing cost per unit = Total manufacturing cost/Number of units

Manufacturing cost per unit = $82,800

5,000

$16.56 per unit




Why Choose Us

  • 100% non-plagiarized Papers
  • 24/7 /365 Service Available
  • Affordable Prices
  • Any Paper, Urgency, and Subject
  • Will complete your papers in 6 hours
  • On-time Delivery
  • Money-back and Privacy guarantees
  • Unlimited Amendments upon request
  • Satisfaction guarantee

How it Works

  • Click on the “Place Order” tab at the top menu or “Order Now” icon at the bottom and a new page will appear with an order form to be filled.
  • Fill in your paper’s requirements in the "PAPER DETAILS" section.
  • Fill in your paper’s academic level, deadline, and the required number of pages from the drop-down menus.
  • Click “CREATE ACCOUNT & SIGN IN” to enter your registration details and get an account with us for record-keeping and then, click on “PROCEED TO CHECKOUT” at the bottom of the page.
  • From there, the payment sections will show, follow the guided payment process and your order will be available for our writing team to work on it.