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:

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.

Activity 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

Explanation / Answer

the activity cost of converting the raw materials into 50 fireplace inserts

= Machine setup cost + Movement cost+Drilling cost+Welding cost+Shaping cost + Assembly cost + Inspection cost

= 40+(15*3+50*150*0.1)+(50*5*2)+(50*70*3)+(0.5*50*25)+(50*19)+(50*2*2)

=13610

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