Question
In: Accounting
Two-Stage ABC for Manufacturing Vollrath Manufacturing, a division of The Vollrath Company, manufactures restaurant equipment. Assume...
Two-Stage ABC for Manufacturing
Vollrath Manufacturing, a division of The Vollrath Company,
manufactures restaurant equipment. Assume the company has
determined the following activity cost pools and cost driver levels
for the year:
| Activity Cost Pool | Activity Cost | Activity Cost Driver | |
|---|---|---|---|
| Machine setup | $ 750,000 | 18,750 | setup hours |
| Material handling | 121,600 | 3,800 | tons of materials |
| Machine operation | 552,500 | 16,250 | machine hours |
The following data are for the production of single batches of two
products, Equipment Stands and Charbroilers during the month of
August:
|
Equipment Stands |
Charbroilers | |
|---|---|---|
| Units produced | 100 | 50 |
| Machine hours | 8 | 25 |
| Direct labor hours | 400 | 1,200 |
| Direct labor cost | $ 10,000 | $ 30,000 |
| Direct materials cost | $ 48,000 | $ 125,000 |
| Tons of materials | 4 | 14 |
| Setup hours | 6 | 36 |
Determine the unit costs of Equipment Stands and Charbroilers using
ABC. (Round answers to the nearest cent.)
Equipment Stands
$Answer
Charbroilers
$Answer
Solutions
Expert Solution
1. Activity rate
| Activity | Cost Pool | / | Cost Driver | = | Activity Rate |
| Machine Setup | $750,000 | / | 18,750 setup hours | = | $40 per setup hour |
| Material handling | $121.600 | / | 3,800 tons | = | $32 per ton |
| Machine operations | $552,500 | / | 16,250 machine hours | = | $34 per machine hour |
2. Allocation of overhead cost
Equipment Stands
| Activity | Cost Driver | x | Activity Rate | = | Overhead cost |
| Machine Setup | 6 setup hours | x | $40 per setup hour | = | $240 |
| Material handling | 4 tons | x | $32 per ton | = | $128 |
| Machine operations | 8 machine hours | x | $34 per machine hour | = | $272 |
| Overhead cost | = | $640 |
Charbroilers
| Activity | Cost Driver | x | Activity Rate | = | Overhead cost |
| Machine Setup | 36 setup hours | x | $40 per setup hour | = | $1,440 |
| Material handling | 14 tons | x | $32 per ton | = | $448 |
| Machine operations | 25 machine hours | x | $34 per machine hour | = | $850 |
| Overhead cost | = | $2,738 |
3. Unit Cost
| Particulars | Equipment Stands | Charbroilers |
| Direct Materials | $48,000 | $125,000 |
| Direct Labor | $10,000 | $30,000 |
| Overhead cost | $640 | $2,738 |
| Total Product Cost | $58,640 | $157,738 |
| Number of Units | 100 | 50 |
| Unit Cost | $586.40 | $3,154.76 |
All the best...
ekkarill92 answered 1 year agoRelated Solutions
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