Question
A product consists of three manufactured parts with one operation each. Material for each part needs to be ordered, received and inspected. The parts
A product consists of three manufactured parts with one operation each. Material for each part needs to be ordered, received and inspected. The parts are assembled into the final product, inspected, and packed. Order processing, scheduling and accounting are required per batch. R&D and engineering costs are apportioned to each unit produced. An order for 250 of the product is received. A summary of the ABC cost estimate for the batch is shown. Activity Cost Basis Hourly Rate Cost/ Activity Log Order Schedule 1/batch $250.00 1/batch 176.00 Order Material 3/batch 125.38 Receive Material 3/batch 121.41 Inspect Material 3/batch 287.43 Set-up Part A 4 hr / batch $18.65 Set-up Part B 7.35 hr/batch 23.88 Set-up Part C 8.50 hr/batch 25.43 Fab Part A 0.35 hr/part 27.94 Fab Part B 0.86 hr / part 29.11 Fab Part C 0.51 hr/part 31.86 Assemble 0.14 hr/part 30.12 Inspect Assembly 0.08 hr / part 30.46 Packing 0.3 hr/part 26.34 Accounting 1/batch 151.78 R & D 1/part 1.75 Engineering 1/part 4.14 Material Cost 1/batch 1578.00 (a) Find the total ABC cost per unit. (b) What is the total cost of the order? (c) Which item(s) should be considered for cost reduction studies based on the cost per unit?
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