Colorado State Contrasting Traditional Costing and Activity Based Costing Essay


Fairbanks Corporation effects two types of cell phone electronic coursers: mole coursers and car coursers.

The prevalent unwritten requireing scheme allocates aloft requires using a plant-wide aloft admonish fixed on plain strive hours. Since the two results are harmonious but insist-upon opposed compressiveness and processes, the audience manager believes that it capacity form discernment to habituate activity-fixed requireing in adjust to get a rectify collision of aloft expenses to the results executed.

Production expectations for 2017 are 17,000 mole coursers and 15,200 car coursers. The mole coursers capture .5 hours to effect. The car coursers capture .75 hours to effect.

The plain embodied and plain strive requires moderate in the two results are as follows:

Wall coursers use $3.75 of plain embodied per item and $9.50 per hour of plain strive. Car coursers use $4.15 of plain embodied per item and $9.50 per hour of plain strive. Each courser sells for $23.00.

Budgeted Sum Factory Aloft for 2017:

ActivityEst. OH CostEst. Volume Levels
Production setup$8,50020 setups
Materials handling$62,0004,500 lbs.
Packaging and shipping$120,0006,400 boxes
Total factory aloft$190,500

Fairbanks’ manager worked after a while the operations frequented to irritate the three aloft activities in adjust to produce activity-fixed requireing. The estimates kindred to the two results’ insist-uponments were:

ActivityWall ChargerCar Charger
Production setup35%65%
Materials handling60%40%
Packaging and shipping55%45%

From the require notice supposing, yield responses in Microsoft Excel to the forthcoming questions. Reference in the CSU-Global Library (Links to an exterior footing.) for Microsoft Excel tutorials or use the Excel Tutorials attach rest in the classroom if help is needed.

  1. Compute the require of each result beneath the simple/unwritten requireing arrangement. For era requires, use plain strive hours.
  2. Compute the net permitted advantage boundary of each result using the simple/unwritten requireing arrangement.
  3. Compute the sum aloft and era require allocation beneath ABC assumptions for each result.
  4. Compute the per item ABC require of each result.
  5. Compute the net advantage boundary of each result using the ABC requireing arrangement.
  6. Compare the net advantage boundary of the results beneath the simple/unwritten require assignment and the ABC assignment for each result. Evaluate the separation.
  7. On a sepaadmonish Excel workbook tab, transcribe a tiny interpretation (closely 2 paragraphs) that the manager capacity save to skill to defend the use of ABC for these two results.