VG Company has identified the following cost pools and costdrivers: CostPools Ac
ID: 2433775 • Letter: V
Question
VG Company has identified the following cost pools and costdrivers:CostPools ActivityCosts Cost Drivers
Machinesetup 360,000 6,000 setup hours
Materialshandling 100,000 50,000 pounds of material
Electricpower 40,000 80,000 kilowatt-hours
The following information pertains to the production of V203 andG179
Item V203 G179
Number of Units produced 5,000 15,000
Direct materialscost 25,000 33,000
Direct Laborcost 14,000 16,000
Number of setuphours 120 150
Pounds of materialused 5,000 10,000
Kilowatt-hours 2,000 3,000
Determine the unit cost for each of the two products usingactivity-based costing.
Explanation / Answer
It would be feasible to calculate cost driver rate for eachactivity in order to work out unit cost Cost Pools Activity Cost Cost Drivers Cost Driver Rate Machine Setup 360,000 6000 setup hrs. 60 per setup hour Materials Handling 100,000 50,000 pounds of materials 2 per pound Electric Power 40,000 80,000 kilowatt-hours 0.50 per kilowatt-hour Cost Pools Activity Cost Cost Drivers Cost Driver Rate Machine Setup 360,000 6000 setup hrs. 60 per setup hour Materials Handling 100,000 50,000 pounds of materials 2 per pound Electric Power 40,000 80,000 kilowatt-hours 0.50 per kilowatt-hour V203 G179 Direct materials cost 25,000 33,000 Direct Labor cost 14,000 16,000 Support cost Machine setup 60 x 120 7,200 60 x 150 9,000 Materials handling 2 x 5,000 10,000 2 x 10,000 20,000 Electric Power 0.50 x 2,000 1,000 0.50 x 3,000 1,500 Total manufacturing cost 57,200 79,500 Number of units produced 5,000 15,000 Unit cost 11.44 5.30 Cost Pools Activity Cost Cost Drivers Cost Driver Rate Machine Setup 360,000 6000 setup hrs. 60 per setup hour Materials Handling 100,000 50,000 pounds of materials 2 per pound Electric Power 40,000 80,000 kilowatt-hours 0.50 per kilowatt-hourRelated Questions
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