Two-Stage ABC for Manufacturing
Meridian Company has determined its activity cost pools and cost
drivers to be the following:
Cost pools | |
---|---|
Setup | $35,000 |
Material handling | 12,800 |
Machine operation | 280,000 |
Packing | 30,000 |
Total indirect manufacturing costs | $357,800 |
Cost drivers | |
---|---|
Setups | 350 |
Material moves | 640 |
Machine hours | 20,000 |
Packing orders | 1,200 |
One product made by Meridian, metal casements, used the following activities during the period to produce 500 units:
Setups | 20 |
Material moves | 80 |
Machine hours | 1,900 |
Packing orders | 150 |
(a) Calculate the cost per unit of activity for each activity cost pool.
Setup | $Answer |
Material handling | $Answer |
Material operation | $Answer |
Packing | $Answer |
(b) Calculate the manufacturing overhead cost per metal casement
manufactured during the period. Round your answer to the nearest
cent.
$Answer
Requirement (a)
Calculation of Activity rates |
|||||
Activity Cost Pool |
Activity driver |
Overhead Cost |
Expected Activity (B) |
Activity rate (A/B) |
|
Setup |
Number of Setup |
$ 35,000.00 |
350 |
$ 100.00 |
Per Setup |
Material handling |
Number of Material move |
$ 12,800.00 |
640 |
$ 20.00 |
Per Material move |
Machine operation |
Number of Machine hour |
$ 2,80,000.00 |
20000 |
$ 14.00 |
Per Machine hour |
Packing |
Number of Packing order |
$ 30,000.00 |
1,200 |
$ 25.00 |
Per Packing order |
Total |
$ 3,57,800.00 |
Setup |
$ 100.00 |
Per Setup |
Material handling |
$ 20.00 |
Per Material move |
Machine operation |
$ 14.00 |
Per Machine hour |
Packing |
$ 25.00 |
Per Packing order |
Requirement (b)
Cost assigned to Metal casement |
|||
Activity name |
Activity Rates |
Activity |
ABC Cost |
(A) |
(B) |
(A x B) |
|
Setup |
$ 100.00 |
20 |
$ 2,000.00 |
Material handling |
$ 20.00 |
80 |
$ 1,600.00 |
Machine operation |
$ 14.00 |
1900 |
$ 26,600.00 |
Packing |
$ 25.00 |
150 |
$ 3,750.00 |
Total Overheads assigned |
$ 33,950.00 |
||
Production |
500 |
||
Overhead cost per unit |
$ 67.90 |
Cost per unit= $67.90
Two-Stage ABC for Manufacturing Meridian Company has determined its activity cost pools and cost drivers to...
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