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	$600,000	12,000 setup hours
Material handling	120,000	2,000 material moves
Machine operation	500,000	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	500	300
Machine hours	4	5
Direct labor hours	200	400
Direct labor cost	$5,000	$10,000
Direct materials cost	$30,000	$20,000
Tons of materials	13	8
Setup hours	3	7

Determine the unit costs of C23 Cams and U2 Shafts using ABC.
Round cost per gallon to two decimal places.

Product Costs
	C23 Cams	U2 Shafts
Direct materials	Answer	Answer
Direct labor	Answer	Answer
Manufacturing overhead:
Machine setups	Answer	Answer
Material handling	Answer	Answer
Machine operation	Answer	Answer
Total job costs	Answer	Answer
Units produced	Answer	Answer
Cost per unit produced	Answer	Answer

Answer 1

Product costs
		C23 Cams	U2 Shafts
Direct materials		30000	20000
Direct labor		5000	10000
Manufacturing overhead:
Machine setups		150	350
Machine handling		780	480
Machine operation		200	250
Total job costs		36130	31080
Units produced		500	300
cost per unit produced		72.26	103.6
Cost per activity
		activity cost	activity cost driver	Activity rate
machine setup		600000	12000	50	per setup
material handling		120000	2000	60	per material move
machine operation		500000	10000	50	per machine hr

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