Stage 1 ABC for a Machine Shop: Assigning Costs to Activities (LO2)

As the chief engineer of a small fabrication shop, Brenda Tolliver refers to herself as a “jack-of-alltrades.”

When an order for a new product comes in, Brenda must do the following:

1. Design the product to meet customer requirements.

2. Prepare a bill of materials (a list of materials required to produce the product).

3. Prepare an operations list (a sequential list of the steps involved in manufacturing the product).

Each time the foundry manufactures a batch of the product, Brenda must perform these activities:

1. Schedule the job.

2. Supervise the setup of machines that will work on the job.

3. Inspect the first unit produced to verify that it meets specifications.

Brenda supervises the production employees who perform the actual work on individual units of product.

She is also responsible for employee training, ensuring that production facilities are in proper operating condition, and attending professional meetings. Brenda’s estimates (in percent) of time spent on each of these activities last year are as follows:

SSiCMinG|OrOCUCt Mn tart cs, cee ae enn 12%
Preparing) bills of materials............... 5 Preparing operations lists:.. 4. .60ve)e. te 12 SERCCUMMONOOSta crs. vs oe oc Ke SSU DENVISINIGESCLUDS: asic asi © aie caehce eee 5 TSO CCUIMOBNCS LU ItS ra cis sti eysl eae cee 2 SUDO SMVISIMOIOKOGUGION: «1... ota. Geman 20 iirainingremployeesan 64 ene. ennar ee 18 NEN METAS Exelln ee ea momian 6a Go oor ih Attending professional meetings .......... 4 100%
Required Assuming Brenda Tolliver’s salary is $132,000 per year, determine the dollar amount of her salary assigned to unit-, batch-, product-, and facility-level activities. (You may need to review Chapter 2 before answering this question.)