Kindly solve the question Bartez Company makes products C and D. Information for overhead costs and...

Kindly solve the question

Bartez Company makes products C and D. Information for overhead costs and for the two products appears below. The company makes 50,000 units of product C each year and 20,000 units of product D.

Activity Driver Total Overhead Cost Prod C Usage Prod D usage

Setups # of setups $200,000 500 setups 1,500 setups

Ordering parts # of parts $300,000 60,000 parts 40,000 parts

Machining MH $600,000 12,000 MH 6,000 MH

Inspections # of Insp $400,000 10,000 Insp 40,000 Insp

Shipping # of shipments $300,000 10,000 Ship 10,000 Ship

Total overhead $1,800,000

* MH – Machine Hours Insp – Inspections Ship - Shipments

Assume that activity based costing is used, with each activity in its own cost pool. What is the rate per setup that should be used to

Expert Solution


Activity	Driver	Total Cost	Product C Usage	Product D usage	Total usage of C & D
Setup	No. Of setup	$2,00,000	500	1500	2000
Ordering Part	No. Of Part	$3,00,000	60000	40000	100000
Machining	Machine Hours	$6,00,000	12000	6000	18000
Inspection	No. Of inspection	$4,00,000	10000	40000	50000
shipping	No. Of Shipment	$3,00,000	10000	10000	20000
	Total	$18,00,000

Units made	For C=	50000 units		for D=	20000 units

Bifurcation of cost as per activity based cost:

Activity	Total Cost	For C	For D
		Amount	Working	Amount	Working
Setup	$2,00,000	$50,000	$200000X 500 /2000	$150,000	$200000X 1500 /2000
Ordering Part	$3,00,000	$180,000	$300000 X 60000 / 100000	$120,000	$300000 X 40000 / 100000
Machining	$6,00,000	$4,00,000	$600000 X 12000/ 18000	$2,00,000	$600000 X 6000/ 18000
Inspection	$4,00,000	$80,000	$400000 X 10000/ 50000	$3,20,000	$400000 X 40000/ 50000
shipping	$3,00,000	$150,000	$300000 X 10000/20000	$150,000	$300000 X 10000/20000
	$18,00,000	$8,60,000		$9,40,000

The per unit cost of C=	Total cost of C/ no. Of units
The per unit cost of C=	$8,60,000/ 50000
The per unit cost of C=	$17.20

The per unit cost of D=	Total cost of D / no. Of units
The per unit cost of D=	$9,40,000/ 20000
The per unit cost of D=	$47.00

Rate per setup that should be used is:

For C:	Cost of setup for product C / no. Of units
	$50,000/ 50000
	$1.00

For D:	Cost of setup for product D / no. Of units
	$1,50,000/ 20000
	$7.50

ekkarill92 answered 2 years ago

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