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Activity-Based Costing, Reducing the Number of Drivers and Equal Accuracy Reducir, Inc., produces two different types of hydraulic cylinders. Reducir produces a major subassembly
Activity-Based Costing, Reducing the Number of Drivers and Equal Accuracy Reducir, Inc., produces two different types of hydraulic cylinders. Reducir produces a major subassembly for the cylinders in the Cutting and Welding Department. Other parts and the subassembly are then assembled in the Assembly Department. The activities, expected costs, and drivers associated with these two manufacturing processes are given below. Process Activity Cost Activity Driver Expected Quantity Cutting and Welding Welding $ 776,000 Welding hours 4,000 Machining 450,000 Machine hours 10,000 Inspecting 448,250 No. of inspections 1,000 Materials handling 300,000 No. of moves 12,000 Setups 240,000 $2,214,250 No. of setups 100 Assembly Changeover $ 180,000 Rework 61,750 Changeover hours Rework orders 1,000 50 Testing 300,000 No. of tests 750 Materials handling 380,000 No. of parts 50,000 Engineering support 130,000 Engineering hours 2,000 $1,051,750 Other overhead activities, their costs, and drivers are listed below.
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