Chicago Computing – Total Costs

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Chicago
Computing Corporation manufactures two remote Internet communication devices:
Personal and DeLuxe. Below is the information relative to their costs:

Name of Pool

Dollars in Pool

No. of Drivers

Driver

Purchasing

$1,000,000

10,000

Purch.
Orders

Soldering

500,000

100,000

Inches

General
Factory

250,000

40,000

Labor
Hours

$1,750,000

Labor rate is $20.00
per hour.

Following
is information relative to the two products:

Description

Personal

DeLuxe

Direct
Material

500,000

800,000

Number
of Units

10,000

5,000

Purchase
Orders

6,000

4,000

Inches

50,000

50,000

Direct
Labor Hours

25,000

15,000

Required:

  1. Compute the
    total cost of making the personal device and the deluxe device using the
    single driver approach with labor hours being the cost driver.  Also, compute the unit cost of each
    device.
  2. Compute the
    total cost of making the personal device and the deluxe device using the
    ABC approach. Also, compute the unit cost of each device.
  3. What are the
    three environmental factors that normally exist where a company is using
    ABC costing?
  4. Discuss some of
    the reasons firms have not adopted ABC costing.

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