Metal Dect Pty Ltd produces over 2 products. These two products are sold to the parent company. They estimate producing 15,000 units in total for June 2023. That is,
Blue:- 5,000
units and White:- 10,000 units.
The following estimates are available for Metal Dect for June 2023:
The following information is available for Blue and the White model.
Blue is sold for $110 per unit, whilst White is sold for $80 per unit.
Metal Dect has considered the introduction of activity-based costing (ABC). To assist with the potential adoption of ABC management have estimated the following data: –
a) Determine the per unit cost for Blue and White using estimated units of production as the allocation base for all manufacturing overhead cost and determine the per unit cost for Blue and White using activity-based costing to allocate total overhead cost.
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b) What are the management and long-term strategy implications for Blue and White under both traditional overhead costing system and the proposed ABC system? Discuss, include supporting calculations.
c) What does Metal Dect Pty Ltd need to consider before adopting activity-based costing?
Explain your answer.