Question

Stage 2 ABC for Manufacturing:
Reassigning Costs to Cost Objectives
Regal Products has developed the following activity cost information for its manufacturing activities:

Activity	Activity cost
Machine setup	$60.00 per batch
Movement	15.00 per batch move
	0.10 per pound
Drilling	5.00 per hole
Welding	2.00 per inch
Shaping	25.00 per hour
Assembly	19.00 per hour
Inspection	2.00 per unit

Filling an order for a batch of 50 fireplace inserts (each insert weighing 150 pounds) required the following:

• Three batch moves
• Two sets of inspections
• Drilling five holes in each unit
• Completing 50 inches of welds on each unit
• Thirty minutes of shaping for each unit
• One hour of assembly per unit

Determine the activity cost of converting the raw materials into 50 fireplace inserts.
$Answer

Answer 1

Activity	Activity cost (a)	Activity Require for 50 Fireplace (b)	Allocated Activity Cost (AXB)
Machine setup	$60.00 per batch	1 Batch	$60.00
Movement
Batch	15.00 per batch move	3 Move	$45.00
Weight	0.10 per pound	=50UnitX 150 Pund X 3 Move	$2,250.00
Drilling	5.00 per hole	5 Hole X 50 Unit	$1,250.00
Welding	2.00 per inch	50 Inch X 50 Unit	$5,000.00
Shaping	25.00 per hour	0.5 HourX 50 Unit	$625.00
Assembly	19.00 per hour	1 Hour X 50 Unit	$950.00
Inspection	2.00 per unit	2 SetX 50 Unit	$200.00
Total			$10,380.00