Why is the correct answer b and not d? 3. LO 2 A firm produces and sells two pro

Question

Why is the correct answer b and not d?

3. LO 2 A firm produces and sells two products, SG8 and DY9. The following information relates to setup costs (a part of factory overhead) of S120,000. Units produced Number of setups Direct labor hours per unit SG8 DY9 1,500 1,500 75 25 2 Total direct labor hours 3,000 3,000 Activity-based costing would allocate which of the following amounts of setup cost to each unit (rounded to the nearest dollar)? SG8 DY9 $40 $40 SG8 DY9 S60 $20 SG8 DY9 S30 S10 SG8 DY9 S20 S60

Explanation / Answer

Setup cost = 120000/100 = 1200 per setup

SG8 = 1200*75/1500 = 60

DY9 = 1200*25/1500 = 20

so answer is b) SG8 = $60; DY9 = $20

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