Question

CLICK HERE TO REVIEW LEARNING OBIECTIVES QUESTION 6 Not complete Marked out of 16.00 Flag question Two-Stage ABC for Manufacturing Detroit Foundry, a large manufacturer of heavy equipment components, has determined the following activity cost pools and cost driver levels for the year: Activity Cost Pool Activity Cost Activity Cost Driver Machine setup Material handling Machine operation $624,000 12,000 setup hours 144,000 2,000 material moves 10,000 machine hours The following data are for the production of single batches of two products, C23 Cams and U2 Shafts during the month of August: C23 Cams U2 Shafts Units produced Machine hours Direct labor hours Direct labor cost Direct materials cost $32,000 $22,000 Tons of materials Setup hours Determine the unit costs of C23 Cams and U2 Shafts using ABC. Round cost per gallon to two decimal places. 400 $7,000 $12,000 13 Product Costs C23 Cams U2 Shafts Direct materials Direct labor Manufacturing overhead: Machine setups Material handling Machine operation Total job costs Units produced Cost per unit produced Check

Answer 1

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost	Expected Activity (B)	Acttvity rate (A/B)
Machine setups	Number of Setup hour	$ 6,24,000.00	12,000	$            52.00	Per Setup hour
Machine handling	Number of Material move	$ 1,44,000.00	2000	$            72.00	Per Material move
machine operation	Number of Machine hour	$ 5,00,000.00	10000	$            50.00	Per Machine hour

Overhead Cost assigned to C23 cams
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Machine setups	$        52.00	3	$   156.00
Machine handling	$        72.00	13	$   936.00
machine operation	$        50.00	4	$   200.00

Overhead Cost assigned to Component U2 Shafts
	Activity rate(A)	Activity Driver Incurred (B)	Overhead Assigned (C=A*B)
Machine setups	$ 52.00	7	$      364.00
Machine handling	$ 72.00	8	$      576.00
machine operation	$ 50.00	5	$      250.00

Solution

Product Costs
	C23 Cams	U2 shafts
Direct material	$         7,000.00	$   12,000.00
Direct labor	$      32,000.00	$   22,000.00
Manufacturing overheads
Machine setups	$            156.00	$         364.00
Machine handling	$            936.00	$         576.00
Machine operation	$            200.00	$         250.00
Total job costs	$      40,292.00	$   35,190.00
Units produced	500	300
Cost per Unit produced	$               80.58	$         117.30