Question

Jasmine Electronics Company produces two products, Resistors and Transistors in a small manufacturing plant. During June, Jasmine Electronics produced 100 units of Resistors and 100 units of Transistors incurring a total manufacturing overhead cost of $21,000. Assume Jasmine Electronics uses Activity Based Costing and that its total manufacturing overhead costs of $21,000 were assigned to the following: ABC cost pools: Material inspections & preparation ($10,000) $ 10 per pound of raw materials Material moves ($2,000) $ 25 per move Machine setups ($3,000) $ 150 per setup Machine operations ($6,000) $ 40 per machine hour Resistors and Transistors used the following quantities of the four activity drivers: Resistors Transistors Pounds of raw materials 500 500 Material moves 50 30 Setups 12 8 Machine hours 90 60 Compute the overhead costs assigned to each unit of Resistors and Transistors using Activity based costing. Make sure to show your work.

Answer 1

Solution

Jasmine Electronics Company

Computation of the overhead costs assigned to each unit of Resistors and Transistors using Activity Based Costing:

• Resistors

Activity	Usage	Activity Rate	Usage x Activity rate	Activity Cost
Material Inspections & Preparations	500 pounds	$10 per pound	500 x $10	$5,000
Material Moves	50 moves	$25 per move	50 x $25	$1,250
Machine Setups	12 setups	$150 per setup	12 x $150	$1,800
Machine Operations	90 hours	$40 per machine hour	90 x $40	$3,600
Total cost				$11,650

Number of units of Resistors = 100

Total overhead cost assigned to 100 units of Resistors = $11,650

Overhead cost per 1 unit of Resistors = $11,650/100 = $116.50

• Transistors

Activity	Usage	Activtity Rate	Usage x Activity rate	Activity Cost
Material Inspections & Preparations	500 pounds	$10 per pound	500 x $10	$5,000
Material Moves	30 moves	$25 per move	30 x $25	$750
Machine Setups	8 setups	$150 per setup	8 x $150	$1,200
Machine Operations	60 machine hours	$40 per machine hour	60 x $40	$2,400
Total cost				$9,350

Number of units of Transistors = 100

Total overhead cost assigned to Transistors = $9,350

Overhead Cost per 1 unit of Transistor = $9,350/100 = $93.50