Question

Caroline's Candles makes a wide variety and size of candles which they sell to Yankee Candle. Caroline recently learned of a new approach to job costing - Activity Based Costing (ABC). She asked her cost accountant. Yvonne, to develop an ABC analysis. After observing operations and talking to supervisors and line workers, Yvonne identified three activities, their cost, cost driver and cost driver quantities: • Producing candles which included melting wax, pouring melted wax into molds, inserting the wick, and emptying the mold when the candles have hardened. The annual activity cost is estimated at $180,000; its cost driver is pounds of wax: 750,000 pounds are expected to be used during the year. Scheduling production and setting up the production line which included calibrating equipment and inspecting the first production units. The annual activity cost is estimated at $150,000; its cost driver is number of setups: 750 setups are expected during the year. Inspecting and packaging completed candles into boxes for shipment to Yankee Candle. The annual activity cost is estimated at $120,000 its cost driver number of packing boxes: 15,000 boxes are expected to be used during the year. HS875 uses 2.4 pounds of wax per unit at a cost of $.80 per pound plus one wick at a cost of $.30 per wick; direct labor workers spend 3 minutes per unit at $10 per hour plus 30% for fringe benefits. The 300 candles being produced in Job HS875 require one setup and will be packed 10 to a box. Caroline prices her candles to achieve 40% gross margin. .

Answer 1

Direct Material Direct labour (2-4 x 0.80 +1 X03) (7. *10) x130% $ 2-22 0.65 Over head Allocated Misc. Candle related 0.24x 2.4) - Notel 0.576 est Setting up est (200 X 1) - Note) Inspection cost (8X19) Notel 80 Totul est 283.446 & Profit (60% X 283.446) 113-3784 Sale Price के $396.8244 200 CS Scanned with CamScanner

Note 1 Estimated cost $ 180, 200 Cost driver 759,200 16 $ 150, oso 750 set up Cost / Driver 182,000 750, eee o, au | Soooo 750 200 129,90 15,000 8 $ 120,000 15000 boxes CS Scanned with CamScanner