Dillon Dog Collars uses activity-based costing. Dillon\'s system has the followi
ID: 2339301 • Letter: D
Question
Dillon Dog Collars uses activity-based costing. Dillon's system has the following features:
Each collar has two parts, direct materials cost is $ 8.00 per collar, and direct labor cost is $ 2.00 per collar. Suppose Animal Hut has asked for a bid on 45 comma 000 dog collars. Dillon will issue a total of 200 purchase orders if Animal Hut accepts Dillon's bid.
Requirement 1. Compute the total cost Dillon will incur to purchase the needed materials and then assemble and package 45 comma 000 dog collars. Also compute the cost per collar. (Round the total cost to the nearest dollar and the cost per collar to the nearest cent.)
Requirement 2. For bidding, Dillon adds a 35% markup to total cost. What total price will the company bid for the entire Animal Hut order? (Round to the nearest dollar.)
The total price the company will bid for the Animal Hut order is $
Requirement 3. Suppose that instead of an ABC system, Dillon has a traditional product costing system that allocates indirect costs other than direct materials and direct labor at the rate of $ 9.20 per direct labor hour. The dog collar order will require 12 comma 000 direct labor hours. What total price will Dillon bid using this system's total cost?
Begin by calculating the total manufacturing cost using the traditional product costing system. (Round to the nearest dollar. If a box is not used in the table leave the box empty; do not select a label or enter a zero.)
The total price that Dillon will bid if using a traditional product costing system that allocates all costs on the direct
labor hours is _______.
Predetermined Overhead
Activity
Allocation Base
Allocation Rate
Purchasing
Number of purchase orders
$57.00
per purchase order
Assembling
Number of parts
0.41
per part
Packaging
Number of finished collars
0.23
per collar
Predetermined Overhead
Activity
Allocation Base
Allocation Rate
Purchasing
Number of purchase orders
$57.00
per purchase order
Assembling
Number of parts
0.41
per part
Packaging
Number of finished collars
0.23
per collar
Explanation / Answer
Req 1. Total cost of order under ABC: Direct material (45000*8) 360000 Direct Labour (45000*2) 90000 Activity cost: Purchasing (200 orders*57) 11400 Assembling (45000*2*0.41) 36900 Packaging (45000*0.23) 10350 Total cost of order under ABC: 508650 Divide: Number of collars 45000 Cost per collar 11.3 Req 2. Total cost of order 508650 Add: Markup @ 35% of total cost 178027.5 Total Price 686677.5 Req 3. Total cost under Traditional costing: Direct material (45000*8) 360000 Direct Labour (45000*2) 90000 Overheads (12000 hours @ 9.20) 110400 Total cost under Traditional costing: 560400 Total cost 560400 Add: Markup @ 35% of total cost 196140 Total price underr Traditional costing 756540
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