Thomas, Inc. uses activity-based costing. The company produces two products, 001

Question

Thomas, Inc. uses activity-based costing. The company produces two products, 001 and 002. Information relating to the two products is as follows: 001 002 Units produced 38,000 50,000 Machine-hours 15,000 17,000 Direct labor-hours 16,000 24,000 Materials handling (number of moves) 8,000 12,000 Setups 10,000 14,000 The following costs are reported: Materials handling $320,000 Labor-related overhead 960,000 Setups 600,000 Setup costs assigned to 002 are: Select one: A. $224,000 B. $350,000 C. $288,000 D. $280,000

Explanation / Answer

Answer is option (B) $350000

This is calculated as follow;

600000 x 14000 / 24000 = $350000.

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