Question
A company produces two products, Product A, which sells for $1,200 per unit, and Product B, which sells for $2,400 per unit, using three different
A company produces two products, Product A, which sells for $1,200 per unit, and Product B, which sells for $2,400 per unit, using three different activities: Design, which uses engineering hours as the cost driver; Machining, which uses machine hours as the cost driver; and Inspection, which uses the number of batches as the cost driver. The cost of each activity and usage of the cost drivers are as follows:
The company manufactures 12,500 units of Product A and 8,500 units of Product B per month. Each unit of Product A uses $480 of direct materials and $220 of direct labor, while each unit of Product B uses $760 of direct materials and $360 of direct labor.
Required:
- Calculate the Design activity proportions for Products A and B.
- Calculate the Machining activity proportions for Products A and B.
- Calculate the Inspection activity proportions for Products A and B.
- Determine the indirect costs assigned to Product A.
- Determine the indirect costs assigned to Product B.
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