Question

Carpenter Corporation manufactures two products, Product A and Product B.

The company uses an Activity Based Costing System that assigns costs based on activity cost drivers.

The following data is available:

	Product A	Product B	Total
Direct Materials Cost (per unit)	$70	$140
Direct Labor Costs  (per hour)	$20	$30
Supporting Labor Costs			$16,000
Utilities and Repairs Costs			$96,000
Order Processing Costs			$24,560
Direct Labor (Production) Hours (per unit)	2	3
Production Units	2,400	800
Supporting Labor (hours)	600	200
Customer Orders	48	32

Compute the Total Manufacturing Costs for Product A using the Activity Based Costing System.

Answer 1

The correct answer is $ 354,736

Note:

Overhead	Costs	Cost Drivers	Activity Total ( A+ B)	Activity Rate ( Cost / Activity Total)
Supporting Labor Costs	16,000	Supporting Labor (hours)	800	20
Utilities and Repairs Costs	96,000	Total Direct Labor Hours	7200	13.33333333
Order Processing Costs	24,560	Customer Orders	80	307

2.

Overhead	Activity Rate	Activity	Costs
Supporting Labor Costs	20	600	12,000
Utilities and Repairs Costs	13.33333	4,800	64,000
Order Processing Costs	307	48	14,736

3.

	Product A
Direct Materials Cost ( Total Units * Per Unit Cost)	70*2400		1,68,000
Direct Labor Costs ( Hours Per Unit * Total Units* Cost Per Hour)	2400*2*20		96,000

4.

Total Manufacturing Costs for Product A	Amount ($)
Direct Materials Cost	1,68,000
Direct Labor Costs	96,000
Supporting Labor Costs	12,000
Utilities and Repairs Costs	64,000
Order Processing Costs	14,736
	3,54,736

5. Total Diret Labor Hours =

Product A = 2,400 Units * 2 Per Unit

= 4,800

Product B = 800 Units * 3 Per Unit

= 2,400

Total = 4,800 +2,400

= 7,200 Hours