Question
Bevans Co. uses a plantwide indirect cost rate based on machine hourse to assign manufacturing support costs to its two products. Because of concerns about
Bevans Co. uses a plantwide indirect cost rate based on machine hourse to assign manufacturing support costs to its two products. Because of concerns about the accuracy of the product costing system, the controller, undertook an activity based costing anaylsis of the manufacturing support costs, including an anlaysis of the support costs related to Product Y's generation of hazardous wastes. The resulting cost information, as we as machine hours and number of units is summarized below:
Product X Y
Direct costs $9,000,000 $4,000,000
Environmental costs 0 $14,000,000
Nonenvironmental costs $22,000,000 $29,000,000
total machine hours 10,000,000 6,000,000
number of units 100,000,000 40,000,000
How do you compute costs per unit for the products using the indirect cost rate based on machine hours for manufacturing support costs. For X is it $9,000,000 + $22,000,000 divided by 10,000,000 (total machine hours)?
Then how do you compute product costs for the products using the activity-based costing figures in the table above? Am I mixing the two? Is ABC adding $9 +$22/10?
Any help would be appreciated. Dayle
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