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Blacksburg Electronics is a custom shop that fabricates circuit boards for various computer related companies. There are two product lines within manufacturing -Surface Mount and
Blacksburg Electronics is a custom shop that fabricates circuit boards for various computer related companies. There are two product lines within manufacturing -Surface Mount and Through Hole. Equipment depreciation ($350,000/year) has always been lumped into manufacturing overhead and allocated based on annual sales volume measured in dollars. The company is considering isolating this cost and allocating it directly to lines based on the value of the equipment associated with the line. It has also been suggested that the amount of time used on each line be used as the basis for the allocation. Calculate the cost per board produced (unit cost) that would be allocated under each of the three cost basis: annual sales volume (the original method), equipment value, and annual machine usage. Through Hole Surface Mount $3,000,000 Value of equipment in the line Annual sales from each line Annual boards produced $6,000,000 200,000 Annual equipment usage 1,000 hrs. $1,000,000 $1,000,000 100,000 750 hrs
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