Question

Stage 1 ABC For Machine Shop: Assigning Costs to Activity

As the chief engineer of a small fabrication shop, Brenda Tolliver refers to herself as a "jack-of-all-trades."
When an order for a new product comes in, Brenda must do the following:

1. Design the product to meet customer requirements.
2. Prepare a bill of materials (a list of materials required to produce the product).
3. Prepare an operations list (a sequential list of the steps involved in manufacturing the product).

Each time the foundry manufactures a batch of the product, Brenda must perform these activities:

1. Schedule the job.
2. Supervise the setup of machines that will work on the job.
3. Inspect the first unit produced to verify that it meets specifications.

Brenda supervises the production employees who perform the actual work on individual units of product. She is also responsible for employee training, ensuring that production facilities are in proper operating condition, and attending professional meetings. Brenda's estimates (in percent) of time spent on each of theses activities last year are as follows:

Unit level activities:
Supervising production	26%
Batch level activities:
Scheduling jobs	19%
Supervising setups	6%
Inspecting first units	2%
Product level activities:
Designing product	11%
Preparing bills of materials	2%
Preparing operations lists	6%
Facility level activities:
Training employees	16%
Maintaining facility	8%
Attending professional meetings	4%
	100%

Assuming Brenda Tolliver's salary is $125,000 per year, determine the dollar amount of her salary assigned to unit-, batch-, product-, and facility-level activities.

	% of Time Spent on Activity	Assignment of Salary
Unit level:
Supervising production	Answer
Total	Answer	Answer
Batch level:
Job scheduling	Answer
Supervising setup	Answer
First unit inspection	Answer
Total	Answer	Answer
Product level:
Product design	Answer
Preparing bills of materials	Answer
Preparing operations lists	Answer
Total	Answer	Answer
Facility level:
Employee training	Answer
Facility maintenance	Answer
Attending professional meetings	Answer
Total	Answer	Answer
Grand total	Answer	Answer

Answer 1

Unit level activities:
Supervising production	26%	$      32,500
Total	26%	$      32,500
Batch level activities:
Scheduling jobs	19%	$      23,750
Supervising setups	6%	$       7,500
Inspecting first units	2%	$       2,500
Total	27%	$      33,750
Product level activities:
Designing product	11%	$      13,750
Preparing bills of materials	2%	$       2,500
Preparing operations lists	6%	$       7,500
Total	19%	$      23,750
Facility level activities:
Training employees	16%	$      20,000
Maintaining facility	8%	$      10,000
Attending professional meetings	4%	$       5,000
Total	28%	$      35,000
Grand Total	100%	$    125,000