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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

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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

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