Question
Bramble Industries manufactures several products including a basic case for a popular smartphone. The company is considering adopting an activity-based costing approach for setting its
Bramble Industries manufactures several products including a basic case for a popular smartphone. The company is considering adopting an activity-based costing approach for setting its budget. The companys production activities, budgeted activity costs, and cost drivers for the coming year are as follows.
Activity | Activity Overhead $ | Cost Driver | Cost Driver Quantity | |||||||
Machine setup | $ 208,260 | # of setups | 780 | |||||||
Inspection | 134,780 | # of quality tests | 460 | |||||||
Materials receiving | 219,300 | # of purchase orders | 1,700 |
The budgeted data for smartphone case production are as follows.
Direct materials | $2.30 per unit | ||
Direct labor | $0.57 per unit | ||
Number of setups | 88 | ||
Number of quality tests | 390 | ||
Number of purchase orders | 70 | ||
Production | 15,000 units |
Calculate the activity-based unit cost of the smartphone case. (Round answer to 2 decimal places, e.g. 15.25.)
Activity-based unit cost | $_________________ |
__________________________________________________________________________________________________________________________________________
Problem:
Sunland is an electronics components manufacturer. Information about the companys two products follows:
AM-2 | FM-9 | ||||
Units produced | 21,200 | 3,600 | |||
Direct labor hours required for production | 16,000 | 25,000 | |||
Units per batch | 4,000 | 90 | |||
Shipping weight per unit | 0.50 | lbs. | 4 | lbs |
The company incurs $1,336,075 in overhead per year and has traditionally applied overhead on the basis of direct labor hours.
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AM-2 | FM-9 | ||
Overhead cost per unit = | $ 24.58 | $ 226.25 |
Assume that Sunland has identified three activity cost pools.
Pool | Cost | Cost Driver | ||
Assembly | $984,000 | Direct labor hours | ||
Setup | 124,575 | Number of setups (1 per batch) | ||
Packaging | 227,500 | Weight |
(i) | Given these activity pools and cost drivers, how much overhead should be allocated to each product? (Round per unit rates to 2 decimal places, e.g. 3.54 and final answers to 0 decimal places, e.g. 45,000.) | ||||||||||
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(ii) | What overhead cost per unit will be allocated to each product? (Round answers to 2 decimal places, e.g. 15.25.) | ||||||||||
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