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 Activity cost Machine setup $80.00 per batch

Movement 15.00 per batch move 0.10 per pound

Drilling 3.00 per hole

Welding 4.00 per inch

Shaping 25.00 per hour

Assembly 19.00 per hour I

nspection 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 80 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

Activity Cost Cost Calculation Setup $80.00 per batch        240.00 80*3 Movement 15.00 per batch move 0.10 per pound          45.00           750.00 (15.00*3) and .10*50*150 pounds Drilling 3.00 per hole           750.00 5*50*3 Welding 4.00 per inch      16,000.00 80*50*4 Shaping 25.00 per hour           625.00 1/2*50*25 Assembly 19.00 per hour I           950.00 1*19*50 Inspection 2.00 per unit           100.00 50*2        285.00      19,175.00 19,460.00

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