Dhaka Power Corporation is one of Walton’s equipment suppliers. Dhaka Power currently uses traditional costing for making business decisions. Upon request from Walton, the company has decided to move...

Dhaka Power Corporation is one of Walton’s equipment suppliers. Dhaka Power currently uses traditional costing for making business decisions. Upon request from Walton, the company has decided to move to activity-based costing for equipment production related to products WAL101 and WAL201. As one of the company’s management accountants, you have been asked to prepare an analysis comparing the two costing methods for the next company board meeting. Your CFO has given you the following quarterly data from the Dhaka Power Corporation’s costing system:

Answer the following questions:




a) What is the total manufacturing cost per unit using traditional costing for WAL101 and WAL201? Use machine hours as the cost-allocation base.




b) What is the total manufacturing cost per unit using activity-based costing for WAL101 and WAL201?




c) What conclusions can be drawn from your results?

Extracted text: Total Indirect Costs for the Quarter: | Assembly Soldering Inspection Tk. 630,000 Tk. 270,000 Tk. 160,000 WAL101 WAL201 Direct costs (materials, labor) Machine hours (assembly) Number of units produced (soldering) Testing hours (inspection) Tk. 162,400 Tk. 178,240 1,080 4,000 480 6,000 6,000 8,000