Question

Two-Stage ABC for Manufacturing Merlot Company has determined its activity cost pools and cost drivers to be the following: Cost Pools Setup Material handling Machine operation packing Total indirect manufacturing costs $112,000 25,600 480,000 60,000 $677,600 Cost drivers Setups Material moves Machine hours Packing orders 350 640 20,000 1,200 One product made by Merlot, metal casements, used the following activities during the period to produce 500 units: Setups Material moves 80 Machine hours 1,900 Packing orders 150 20 a. Calculate the cost per unit of activity for each activity cost pool for Merlot Company Setup costs Materials handling costs Machine operating costs Packing costs 0 per setup 0 per move 0 per hour 0 per arder b. Calculate the manufacturing overhead cost per metal casement manufactured during the period. Round cost per unit to two decimal places, if needed. Manufacturing Overhead Cost per Metal Casement Setups Material moves Machine hours Packing orclers Total manufacturing overhead Casements produced Cost per casement

Answer 1

Ans-a-Calculating the cost per unit of activity for each activity cost pool for Merlot Company:-

Activity	Cost	Cost per activity driver
Setup costs	$112,000/350	$320 per setup
Material handing costs	$25,600/ 640	$40 per material move
Machine operating costs	$480,000/ 20,000	$24 per machine hour
Packing Costs	$60,000/1,200	$50 per order

b)- Calculating the manufacturing overhead cost per metal casement during the period:-

Manufacturing Overhead Cost per Metal Casement:
Setups ($320* 20)	$6,400
Material moves ($40 *80)	$3,200
Machine hours ($24 *1,900)	$45,600
Packing orders ($50* 150)	$7,500
Total manufacturing overhead	$62,700
Casements produced	500
Cost per casement ($62,700/ 500 casements)	$125.40 per unit

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