The cost accountant of abc manufacturing

The cost accountant of ABC Manufacturing attended a workshop on activity-based costing and was impressed by the results. After consulting with the production personnel, he prepared the following information on cost drivers and the estimated volume for each driver.

Activity

Cost driver

Cost driver volume

Total

Machining

 

Ace

Best

Champ

 

Setup

Number of setups

125

75

50

250

Machining

Machine hours

2,500

1,500

2,000

6,000

Assembly

         

Assembly

Direct labor hours

25,000

15,000

5,000

45,000

Inspection

Number of inspections

50

25

25

100

The cost accountant also determined how much overhead costs were incurred in each of the four activities as follows:

Activity

Overhead costs

Machining

 

Setup

$150,000

Machining

750,000

Total Machining department overhead

$900,000

Assembly

 

Assembly

$360,000

Inspection

90,000

Total Assembly department overhead

$450,000

Total overhead costs

$1,350,000

Required:

a. Determine the cost driver rate for each activity cost pool.

b. Use the activity-based costing method to determine the unit cost for each product.

c. Summarize and comment the results.

 

 

"We Offer Paper Writing Services on all Disciplines, Make an Order Now and we will be Glad to Help"