Work backward to determine ABC rates (Learning Objective 2)

Channell Fabricators completed two jobs in June 2007. Channell Fabricators recorded the following costs assigned to the jobs by the company’s activity-based costing system:

Job 622 required 3,000 parts, 60,000 lathe turns, and 1,400 machine hours.
All 300 of the job’s output units were tested. All units of Job 409 were tested.
Requirements 1. How do you know that at least one of the costs recorded for the two jobs is inaccurate?
2. Disregard materials handling costs. How many parts were used for Job 409? How many lathe turns did Job 409 require? How many machine hours? How many units were produced in Job 409?
3. A nearby company has offered to test all product units for $13 each. On the basis of ABC data, should Channell Fabricators accept or reject the offer? Give your reason.

Transcribed Image Text:

Activity Allocation Base Allocated Cost Job 409 Job 622 Materials handling Number of parts $ 500 $ 1,500 Lathe work Number of lathe turns 5,000 15,000 Milling Grinding Testing Number of machine hours 4,000 28,000 Number of parts 300 1,500 Number of output units 126 2,700