Built on three nut butters and five activity pools, this AC505 Unit 2 activity based costing problem argues why labor hours mislead and why timed washdowns beat counted ones. Searches like "ac 505 unit 2 assignment example", "ac505 unit 2 sample" and "ac505 unit 2 example" land here.
What a finished AC505 Unit 2 activity based costing problem looks like
Two schedules, a driver table and a short argument. The first schedule spreads 3,690,000 dollars of consumer division overhead over 23,000 direct labor hours at 160.43 an hour, giving 6.42 of overhead per case of peanut butter, 6.95 for almond and 9.63 for sunflower seed. The driver table lists five pools with the driver chosen for each: filling line hours at 130.96, allergen washdown hours at 954.70, lab release tests at 300, production runs at 1,800 and active SKUs at 15,000 each. The second schedule applies those rates, and overhead per case becomes 4.88, 8.55 and 23.71. A comparison panel sets margins side by side, and a final block recomputes sunflower seed butter with washdowns counted rather than timed.
How a AC505 Unit 2 example is structured
The problem opens with the reason labor hours mislead here, since the unit typically asks for that defense before any rate is built. The filling crew is the same nine people whatever runs; labor hours track line time, while the costs that differ by product accrue when the line is stopped for a washdown or held for a lab release, hours no direct labor record captures. Pools follow, each with its driver justified in a clause and the rejected alternative named. The washdown pool gets the longest treatment: a count of events would charge a ninety-minute flavor change the same as an eight-hour allergen clean, so duration is chosen despite being harder to record. Rates and assignments come next, then a reconciliation proving both systems allocate 3,690,000 dollars. A closing paragraph interprets the result and stops short of recommending that any product be dropped.
Why labor hours mislead here
Nine people run the filler whatever the product, so labor hours simply mirror line time. The costs separating sunflower seed butter from peanut butter arise while the line is stopped for cleaning or waiting on a lab result, when no labor hour is charged to any case.
Five pools, five drivers
Filling line operation by line hours, allergen washdowns by washdown hours, release testing by tests run, scheduling and setup by production runs, and label and formula upkeep by active SKUs. Each pool names the alternative driver considered and why it lost.
Timed washdowns, not counted
Sunflower seed runs need an eight-hour allergen clean and almond runs a six-hour one; peanut flavor changes take ninety minutes. Counting events at 3,456 dollars each would charge them alike, so the problem uses 954.70 per washdown hour and says why.
One 3,690,000 pool, two splits
Labor-hour overhead of 2,566,957, 834,261 and 288,783 dollars becomes 1,952,459, 1,026,178 and 711,364 under activities. Both columns sum to 3,690,000, showing cost moving between products rather than appearing from nowhere.
Sunflower seed butter, repriced
Overhead per case climbs from 9.63 to 23.71 dollars and margin falls from 14.93 to 0.85. With washdowns counted instead of timed the margin would read 6.42, so the driver choice alone moves the answer by more than five dollars a case.
What the margin does not decide
A thin margin raises questions about price, run length and the retailers who stock the allergen-free line for shoppers who cannot buy the others. The problem lists them and leaves the decision to a relevant cost analysis counting only avoidable costs.
Where marks go in AC505 Unit 2
The defense of each driver carries more weight than the arithmetic here, since AC505 treats choosing a cost system as the judgment and computing it as the easier half. Drivers picked because the data happened to be on hand cost marks, and so does reusing labor hours for a pool that labor does not cause. If the activity allocation does not sum back to 3,690,000 dollars, something was dropped or counted twice, and that total is often the first figure checked. The transaction or duration question is where graduate answers separate from undergraduate ones: a count treating an eight-hour clean like a ninety-minute one misstates the very product the method exists to cost correctly. Recommending that a low-margin product be dropped on activity-based figures alone overreaches, because much of its overhead would remain.
Get a AC505 Unit 2 example written to your instructions
Activity costing depends on local facts: the overhead pools in your Unit 2 case, what each product consumes, and the base currently used to spread cost. With those and the rubric, a finished problem defending every driver and reconciling both allocations is ready in 24-48h, with the first sample unbilled.
AC505 Unit 2 questions, answered
When is a duration driver better than a transaction driver?
When the same activity takes very different amounts of time across products. Counting setups or cleanings is cheaper to record, but it charges a long event and a short one identically. If durations vary widely, as allergen washdowns do against flavor changes, a duration driver costs products more accurately, and the answer should argue that the extra recording is worth it.
Must every overhead pool have its own driver?
Only pools whose costs arise from different activities. Combining two pools with the same driver loses nothing and keeps the system simpler. Graduate prompts often reward restraint here: five well-defended pools usually outscore twelve thinly justified ones, since each added pool raises measurement cost and the answer must show the extra accuracy is worth paying for.
Should the answer recommend a price change?
Usually it should raise the question rather than settle it. Activity costing shows what a product consumes; a pricing decision also depends on competitors, retailer terms and which costs would really change. A sentence noting that the allergen-free line now looks thin at current prices, and what a relevant cost analysis would need to check, reads as judgment rather than overreach.