Question
Aquamarine plans to manufacture two lines of chairs in the coming year lounge and patio. The company is considering introducing an activity-based costing system. Given
Aquamarine plans to manufacture two lines of chairs in the coming year lounge and patio. The company is considering introducing an activity-based costing system. Given below are each activity, its cost and its related activity driver. Activity Cost Activity Driver Material setups $200,000 Number of setups Material handling $150,000 Number of parts Cutting $600,000 Number of parts Assembly $300,000 Direct labour hours Finishing $600,000 Number of units The level of activity for the year is: Lounge Patio Units to be produced 10,000 5,000 Number of setups 60 60 Number of parts per unit 10 5 Direct labour hours per unit 4 2 Required a) Under an activity-based costing system, what is the activity cost per unit of activity driver for assembly? (5 marks) b) Under an activity-based costing system, what is the total cost of lounge chairs for the year? ?
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