Question

Pasternik Company produces and sells two products, Alpha and Zeta. The following information is available relating to its setup activities:

	Alpha			Zeta
Units produced		300			28,000
Batch size (units)		20			800
Total direct labor hours		2,000			56,000
Cost per setup	$	3,000		$	3,000

Use of activity-based costing would allocate the following amounts of setup cost to each unit: (Rounded to the nearest cent.)

	Alpha			Zeta
A)	$	150.00		$	3.75
B)	$	375.00		$	900.64
C)	$	4.92		$	5.00
D)	$	93.00		$	22.50
E)	$	10.00		$	0.11

Multiple Choice

• Option A

• Option B

• Option C

• Option D

• Option E

Answer 1

Calculate setup cost per unit

	Alpha	Zeta
Setup	300/20 = 15	28000/800 = 35
Cost per setup	3000	3000
Total Setup Cost	45000	105000
Unit	300	28000
Setup cost per unit	150	3.75

So answer is a) Option A