Traditional vs. Activity Based Costing

Updated: 3/21/2021

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- Traditional CostingA computer takes 2 workers to build it that are paid $45 an hour working 40 hours a week. It takes a worker 2 hours together to build the computer. The machines to run cost $75 for every 10 computers made. The materials cost $170 to find and buy for each computer. This makes one computer equal out to $357.50 to make.
- Traditional CostingHeart Surgery is expensive, it takes 5 workers to operate. These workers are paid $99 an hour and the surgery takes 4 hours to complete. The machines needed to run take $600 every 2 hours to opporate. To get the materials cost $4500 for everything. The entire surgery costs $7680.
- Traditional CostingTo make a car it takes mostly an assembly line, this contains an assembly of people. It takes a total of 10 workers paid at $60 an hour to make a car. Tis takes them 1 hour to make. The machines cost an electricity bill of $1200 for every 2 hours. The materials needed to build the car cost a total of $15,000. This would total one car to be $16,200.
- Activity Based CostingA computer that takes the same amount of money as the last one to make is $357.50. But the whole price of everything wasn't taken in. A truck delivering the supplies drives 500 miles and uses 5 tanks of gas. Each tank costs $59.99. This is added onto the main price in Activity based costing so the computer will now cost $657.45 to make.
- Activity Based CostingHeart Surgery would cost even more for Activity Based Costing. You would have to add the price of recovery. The average patient has to recover 5 days in the hospital. To tend to their needs cost $500 a day. This would make heart surgery now cost $10,180.
- Activity Based CostingActivity Based Costing would make the car cost even more. The car when built and when being built has to travel. To get to the facility to be built it is 600 miles costing $59 for every 200 miles. To deliver to a dealer is 800 miles with the same truck and gas milage. This makes the car being built to cost $16,613.