Stage 2 ABC for Manufacturing: Reassigning Costs to Cost Objectives Regal Produc

Question

Stage 2 ABC for Manufacturing: Reassigning Costs to Cost Objectives Regal Products has developed the following activity cost information for its manufacturing activities: Activity cost Machine setup $40.00 per batch

Movement 15.00 per batch move 0.10 per pound

Drilling 2.00 per hole

Welding 3.00 per inch

Shaping 25.00 per hour

Assembly 19.00 per hour

Inspection 2.00 per unit

Filling an order for a batch of 50 fireplace inserts (each insert weighing 150 pounds) required the following: •Three batch moves •Two sets of inspections •Drilling five holes in each unit •Completing 70 inches of welds on each unit •Thirty minutes of shaping for each unit •One hour of assembly per unit Determine the activity cost of converting the raw materials into 50 fireplace inserts.

Explanation / Answer

Cost of converting Raw Material into 50 fireplace inserts Required Cost Activity Driver Machine Set up batch 40 1 40 Movement Batch 15 3 45 Drilling Hole 2 250 500 Welding Inch 3 3500 10500 Shaping Hou 25 25 625 Assembly Hour 19 50 950 Inspection Unit 2 2 4 Total Cost 12664

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