Question

ADA Pharmaceutical produces 3 drugs..Diomycin, Homycin, and Addolin.

Here is the budget information

Cost of direct materials. Diomycin $205,000. Homycin $265,000. Addolin $258,000

Cost of Direct Labor: $250,000 $234,000 $263,000

# of direct labor hours 7,200 6,800 2,000

Number of Capsules 1,000,000 500,000 300,000

ADA has identified the following activities and cost drivers and has assigned them a total overhead cost of $200,000

ACTIVITY: COST DRIVER Budgeted Overhead Cost Budgeted Cost Driver Volume

Machine Set-Up Set up hours. $16,000 1,600

Plant Management Number of Workers $36,000 1,200

Supervision of Direct Labor Direct Labor Hours $46,000 16,000

Quality Inspection Inspection Hours $50,400. 1,050

Order Expediting Customers Served $51,600 645

Total Overhead   $200,000

The following information was gathered about the cost-driver volume for each product

Diomycin Homycin Addolin

Set up hours 200 600 800

# of workers 200 400 600

Direct Labor Hours 7,200 6,800 2,000

Inspection Hours 150 200 700

Customers Served 45 100 500

Use activity based cost system to calculate the cost of each product.

Answer 1