Question 1: Two-Stage ABC for Manufacturing
Merlot Company has determined its activity cost pools and cost drives to be the following:
|
Cost pools
|
|
Setup
|
$ 56,000
|
|
Material handling
|
12,800
|
|
Machine operation
|
240,000
|
|
Packing
|
60,000
|
|
Total indirect manufacturing costs
|
$368,800
|
|
Cost drivers
|
|
Setups
|
400
|
|
Material moves
|
500
|
|
Machine hours
|
16,000
|
|
Packing orders
|
1,000
|
|
|
|
One product made by Merlot, metal casement, used the following activities during the period to produce 500 units:
|
Setups
|
20
|
|
Material moves
|
80
|
|
Machine hours
|
1,900
|
|
Packing orders
|
150
|
Required-
a. Calculate the cost per unit of activity for each activity cost pool for Merlot Company?
b. Calculate the manufacturing overhead cost per metal casement manufacturing during the period.
Question 2: Two-Stage ABC for Manufacturing
Assume Sherwin-Williams Company, a large paint manufacturing, has determined the following activity cost pools and cost driver levels for the latest period:
|
Activity Cost Pool
|
Activity Cost
|
Activity Cost Driver
|
|
Machine setup
|
$975,000
|
2,500 setup hours
|
|
Material handling
|
830,000
|
5,000 material moves
|
|
Machine operation
|
180,000
|
20,000 machine hours
|
The following data are for the production of single batches of two products, Mirlite and Subdue:
|
|
Mirlite
|
Subdue
|
|
Gallons produced
|
50,000
|
30,000
|
|
Direct labor hours
|
400
|
250
|
|
Machine hours
|
800
|
250
|
|
Direct labor cost
|
$10,000
|
$7,500
|
|
Direct materials cost
|
$350,000
|
$150,000
|
|
Setup hours
|
15
|
12
|
|
Material moves
|
60
|
35
|
Required- Determine the batch and unit costs per gallon of Mirlite and Subdue using ABC.