Problem
The company has implemented an activity-based costing system for its manufacturing overhead costs with the activity cost pools and activity driver data below.
|
Activity
|
Activity Cost ($)
|
Total
|
Activity Drivers
|
|
|
|
|
Basic system
|
Advanced system
|
|
Machine set up
|
100 000
|
200 setup
|
50 setup
|
150 setup
|
|
Material receiving
|
60 000
|
80 000 kilograms
|
30 000 kilograms
|
50 000 kilograms
|
|
Inspection
|
80 000
|
1600 inspections
|
700 inspections
|
900 inspections
|
|
Engineering
|
140 000
|
7 000 EH
|
3 000 EH
|
4 000 EH
|
|
Total Overhead
|
800 000
|
|
|
|
MH = Machine hours
EH = Engineering hours
Southern Cross plans to produce 1 000 units of each model of fax machine
Task
• For each activity, calculate the cost per unit of activity driver (e.g. the cost per setup)