| Course | AC420 Cost Accounting |
|---|---|
| Unit | Unit 5 |
| Paper type | Activity-based costing comparison |
| Length | About 540 words, 4 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Accounting |
| Updated | October 2026 |
Free sample paper for AC420 Unit 5
From Second Earner to a 14-Cent Loss: A Unit 5 Activity-Based Costing Comparison for Custom Logo Cookware
[Student Name]
Purdue University Global
AC420: Cost Accounting
Unit 5 Activity-Based Costing Comparison
[Instructor Name]
[Date]
Bellhaven Iron Works and every figure are composite; the textbooks and articles cited are real.
Products and Volumes
1. 10-inch skillet: 400,000 units, price $16.90, direct materials and labor $5.06, 0.06 direct labor hours each.
2. Enameled Dutch oven: 40,000 units, price $58.00, direct materials and labor $19.20, 0.30 hours each.
3. Custom logo piece: 24,400 units, price $40.20, direct materials and labor $9.90, 0.25 hours each.
Allocation 1: Plant-Wide Labor-Hour Rate
$3,678,400 / 42,100 direct labor hours = $87.37 an hour.
1. Skillet: overhead $5.24; margin $16.90 minus $5.06 minus $5.24, or $6.60.
2. Dutch oven: overhead $26.21; margin $12.59.
3. Custom logo piece: overhead $21.84; margin $8.46.
Ranked by margin per unit, the custom line sits second.
Allocation 2: Cost Hierarchy
Each pool is assigned to a level by asking what makes the cost rise:
1. Unit level, melting: $1,484,000 over 2,028 tons poured, $731.76 a ton. Furnace power and refractory wear follow metal poured. Tons: skillet 1,660, Dutch oven 260, custom 108.
2. Batch level, pattern changeovers: $612,000 over 340 changeovers, $1,800 each, because each swap idles the molding line. Skillet 30, Dutch oven 50, custom 260.
3. Batch level, enamel color batches: $260,000 over 100 batches, $2,600 each. Dutch oven 70, custom 30.
4. Product-sustaining, pattern upkeep: $162,000 over 22 active patterns, $7,363.64 each, since a pattern costs money to store and repair whether it runs or not. Skillet 2, Dutch oven 4, custom 16.
5. Facility level: $1,160,400 of plant management, property tax and insurance, held at the plant line and not assigned to products.
Assigned overhead per unit: skillet $1,283,441 / 400,000 = $3.21; Dutch oven $491,711 / 40,000 = $12.29; custom $742,848 / 24,400 = $30.44.
Margins per unit: skillet $8.63; Dutch oven $26.51; custom logo piece, a loss of $0.14.
Custom logo work consumed 260 of the plant's 340 changeovers and 16 of its 22 patterns while using only 14 percent of its labor hours, so a rate built on labor hours charged it for a small share of the costs it actually caused.
Reconciliation
Product-level margins: skillet $3,452,559, Dutch oven $1,060,289, custom $(3,528), total $4,509,320. Less facility costs of $1,160,400, operating income is $3,348,920, the same total the labor-hour allocation gives. The hierarchy moves overhead between products without changing the plant's profit.
Ranking and What It Means
Under labor hours: Dutch oven, custom, skillet. Under the hierarchy: Dutch oven, skillet, custom. Cooper and Kaplan (1988) showed that volume-based rates systematically overcost high-volume standard products and undercost low-volume specialty ones, which is exactly the pattern here. The loss does not mean the custom line should end. Patterns in storage and the repair crew would remain for a while, and custom buyers may also buy standard pans. The first response is pricing: a pattern charge or a minimum order that covers a changeover. Facility costs stay unassigned because spreading them would bring back the arbitrariness the hierarchy removes (Datar & Rajan, 2021). Kaplan and Anderson (2004) note that a simpler time-driven version could keep such an analysis current without repeated surveys.
References
Cooper, R., & Kaplan, R. S. (1988). Measure costs right: Make the right decisions. Harvard Business Review, 66(5), 96-103.
Datar, S. M., & Rajan, M. V. (2021). Horngren's cost accounting: A managerial emphasis (17th ed.). Pearson.
Kaplan, R. S., & Anderson, S. R. (2004). Time-driven activity-based costing. Harvard Business Review, 82(11), 131-138.
Reading the AC 420 Unit 5 instructions
Unit 5 of AC420 asks you to allocate one overhead pool under two methods and compare the product costs they produce. Begin with each product's volume, price, direct costs and use of the traditional allocation base. Allocate the full pool with a single plant-wide rate and compute margins. Then build an activity-based allocation: assign each cost pool to a level of the hierarchy by asking what makes it rise, choose a driver for each, compute activity rates and trace costs to products. Decide whether facility-sustaining costs should be assigned and explain your choice. Reconcile the two methods to the same total income. Rank the products under each and explain the mechanism behind any reversal. Discuss what the results mean for decisions without jumping straight to eliminating a product. Cite the textbook and the activity-based costing literature in APA 7.
How this AC420 Unit 5 example is built
The sample lists three products with volumes, prices, direct costs and labor hours. The plant-wide allocation gives overhead of $5.24, $26.21 and $21.84 and ranks custom work second. The hierarchy section assigns five pools, from melting at $731.76 a ton to $1,160,400 of facility cost held at the plant line, each with its driver and product quantities. Per-unit overhead becomes $3.21, $12.29 and $30.44, and margins become $8.63, $26.51 and a 14-cent loss. The highlighted sentence explains that custom work used 260 of 340 changeovers and 16 of 22 patterns on 14 percent of labor hours. A reconciliation shows product margins of $4,509,320 and the same operating income. The closing section cites Cooper and Kaplan, Datar and Rajan, and Kaplan and Anderson, and treats the loss as a pricing question.
Where the points sit in the AC420 Unit 5 rubric
AC420 activity-based costing comparisons earn their marks for correct allocations, sound driver choices and clear interpretation. Both allocations must use the same total pool so the comparison is fair. Each pool's level in the hierarchy and each driver should be justified in terms of what causes the cost. Treating facility-sustaining costs thoughtfully, and explaining the choice, separates strong work from adequate work. The reconciliation to a single income figure proves no cost was lost or invented. Graders look for an explanation of why the ranking changed, tied to specific activities, not just a statement that it did. Recommendations should recognize that some costs behind a negative margin would not disappear if the product ended. Purdue Global also marks organized tables and APA 7 references to the costing literature.
AC420 Unit 5 help: mistakes that cost points
Many Unit 5 comparisons use different total pools under the two methods, so the results cannot be compared. Drivers get picked for convenience, not for what causes the cost. Facility costs are spread to products under activity-based costing, reintroducing the arbitrary allocation the method was meant to remove. The ranking change is reported without explaining which activities caused it. A negative margin is read as an instruction to drop the product. The two methods fail to reconcile to the same income. If your case involves a hospital service line, a bank's account types or a distributor's customers, our writers can build both allocations and the comparison from your data.
Get an AC420 Unit 5 example written to your instructions
Include the Unit 5 overhead pools, the activity data by product and the existing allocation base, plus the rubric. Both allocations are built from those figures and reconciled to the same total, and the change in your product ranking is explained activity by activity. A first custom sample carries no fee and is returned in 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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AC420 Unit 5 questions, answered
Should facility-sustaining costs be allocated to products at all?
For internal product decisions, usually not. Plant management, property tax and insurance would not change if one product line grew or shrank, so any allocation is arbitrary. For inventory valuation under outside reporting rules, full absorption is still required, which is why the sample keeps the hierarchy result as an internal analysis and says so in a sentence.
How is a cost pool assigned to a level in the hierarchy?
By asking what makes the cost rise. If it grows with every unit poured, it is unit-level; with every run or setup, batch-level; with the number of distinct products supported, product-sustaining; and if nothing short of closing the plant changes it, facility-level. The sample states that test once and applies it to each pool in the problem.
Is a negative activity-based margin a reason to drop the product?
Not by itself. Some resources behind that margin, such as pattern storage and repair staff, would remain for a while after the line ended, and custom orders may bring in customers who buy standard pans too. The sample treats the reversal as a pricing question first, testing a minimum order size and a pattern charge, before any elimination is discussed.
Where can I find a free AC420 Unit 5 sample paper?
This page holds a complete AC420 Unit 5 activity-based costing comparison for a composite cast-iron maker, with a plant-wide allocation, a four-level hierarchy, a reconciliation, a new ranking and APA 7 references.
Why does custom logo work lose money under activity-based costing in AC420 Unit 5?
It caused 260 of the plant's 340 pattern changeovers and needed 16 of its 22 patterns, but used only 14 percent of labor hours. A labor-hour rate never charged it for those changeovers and patterns.