E4-8 Wilmington, Inc. manufactures five models of kitchen appliances. The compan
ID: 2340735 • Letter: E
Question
E4-8 Wilmington, Inc. manufactures five models of kitchen appliances. The company is installing activity-based costing and has identified the following activities performed at its Mesa plant. 1. Designing new models. 2. Purchasing raw materials and parts. 3. Storing and managing inventory 4. Receiving and inspecting raw materials and parts 5. Interviewing and hiring new personnel. 6. Machine forming sheet steel into appliance parts. 7. Manually assembling parts into appliances. 8. Training all employees of the company 9. Insuring all tangible fixed assets. 10. Supervising production. 11. Maintaining and repairing machinery and equipment. 12. Painting and packaging finished appliances. ify activity cost drivers. 2), AN Having analyzed its Mesa plant operations for purposes of installing activity-based costing, Wilmington, Inc. identified its activity cost centers. It now needs to identify relevant activity cost drivers in order to assign overhead costs to its products Instructions Using the activities listed above, identify for each activity one or more cost drivers that might be used to assign overhead to Wilmington's five products.Explanation / Answer
A cost driver is used to assign overhead costs to the number of produced units. The following cost drivers are used the Wilmington Inc in relation to following activities.
1. Designing new models: number of Designing hours
2. Purchasing raw materials and parts: Number of orders processed
3. Storing and managing inventory: Number of parts available in stock
4. Receiving and inspecting raw materials and parts: Number of boxes
5. Interviewing and hiring new personnel: Number of new employees hired
6. Machine forming sheet steel into appliance parts:number of Machine hours
7. Manually assembling parts into appliances:number of Employees, number of direct labor
8. Training all employees of the company: Number of employees
9. Insuring all tangible fixed assets: Book value of assets
10. Supervising production: number of Direct labor hours
11. Maintaining and repairing machinery and equipment: Number of machines, number of machine hours
12. Painting and packaging finished appliances: amount of finished appliances, labels, packing material, gallons of paint.
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