Question

Two-Stage ABC for Manufacturing Assume Sherwin-Williams Company, a large paint manufacturer, has determined the following activity cost pools and cost driver levels for the latest period: Activity Cost Pool Activity Cost Activity Cost Driver Machine setup 5900,000 2,500 setup hours Material handling 820.000 4.000 material moves Machine operation 400,000 20,000 machine hours The following data are for the production of single batches of two products, Mirlite and Subdue: Mirlite Subdue Gallons produced 60.000 25,000 Direct Isbor hours 400 250 Machine hours Direct labor cost $10,000 $7500 Direct materials cost $30.000 $150.000 Setup hours Material moves 800 Determine the batch and unit costs per gallon of Mirlite and Subdue using ABC Round cost per gallon to two decimal places, Product Costs Mirlite Subdue Direct materials Direct labor Manufacturing overhead Machine setups Material handling Machine operation Total cost per batch Gallons produced Cost per gallon

Answer 1

Calculate unit cost

	Mirlite	Subdue
Direct material	360000	150000
Direct labor	10000	7500
Manufacturing overhead
Machine setups	5400	4320
Material handling	12300	7175
Machine operation	16000	5000
Total cost per batch	403700	173995
Gallons produced	60000	25000
Cost per gallon	6.73	6.96