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Two-Stage ABC for Manufacturing Assume Sherwin-Williams Company, a large paint manufacturer, has determined the following activity...

Two-Stage ABC for Manufacturing
Assume Sherwin-Williams Company, a large paint manufacturer, has determined the following activity cost pools and cost driver levels for the latest period:

Activity cost pool Activity cost Activity cost driver
Machine setup $950,000 2,500 setup hours
Material handling 620,000 5,000 material moves
Machine operation 200,000 20,000 machine hours

The following data are for the production of single batches of two products, Mirlite and Subdue:

Mirlite Subdue
Gallons produced 60,000 10,000
Direct labor hours 500 350
Machine hours 900 250
Direct labor cost $10,000 $7,500
Direct materials cost $350,000 $150,000
Setup hours 15 11
Material moves 70 35

Determine the batch and unit costs per gallon of Mirlite and Subdue using ABC. (Round your answers to the nearest cent.)
Mirlite $Answer

per gallon
Subdue $Answer

per gallon

Solutions

Expert Solution

Cost per unit produced

Mirlite = $ 6.39 per Gallon

Subdue = $ 16.85 per Gallon

Product Cost                                                       Mirlite                  Subdue

Direct materials                                                    $ 350,000             $150,000

Direct labor                                                          $10,000                $ 7,500

Manufacturing overhead

Machine setup

(15hrs x $380)                                                    $ 5,700

(11hrs x $380)                                                                                  $ 4,180

Material handling

(70x$124)                                                            $ 8,680

(35x$124)                                                                                         $ 4,340

Machine Operation

(900x$10)                                                            $ 9,000

(250x$10)                                                                                         $ 2,500

Total cost per batch $ 3,83,380            $ 1,68,250

Gallons produced 60000 10000

Cost per unit produced $ 6.39 $ 16.85

Machine setup               = $ 950000 / 2500 = $ 380

Material handling           = $620000/5000   = $ 124

Machine operation = $ 200000 / 20000 = $ 10

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ALL THE BEST !!!

ekkarill92 answered 1 year ago
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