P18-26A Product costing in an ABC system [15–20 min]
The August Manufacturing Company in Rochester, Minnesota, assembles and tests
electronic components used in handheld video phones. Consider the following data
regarding component T24:
Direct materials cost $ 82.00
Direct labor cost $ 23.00
Activity costs allocated ?
Manufacturing product cost ?
Requirements
1. Complete the missing items for the two tables.
2. Why might managers favor this ABC system instead of August’s older system,
which allocated all conversion costs on the basis of direct labor?
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