Question
Custom Products uses activity-based costing (ABC), and has identified the following cost pools and rates for the upcoming fiscal year: Activity Cost Pool Activity Measure
Custom Products uses activity-based costing (ABC), and has identified the following cost pools and rates for the upcoming fiscal year:
Activity Cost Pool | Activity Measure | Activity Rate |
Order processing | Number of orders | $25 per order |
Design | Design hours | $35 per design hour |
Machine setups | Number of setups | $47 per setup |
Manufacturing support | Direct labour hours | $48 per direct labour hour |
A customer recently placed one order for three custom-designed products (10 units of each design). The order requires the following total material and labour:
Direct Material $90
Direct Labour 4 hours @ $17/hr
This order also requires two design hours and one machine setup.
Required:
- Determine the total cost for the new customer order. (5 marks)
- Describe a duration driver. Identify one activity cost pool from the list above that uses a duration driver for its activity measure. (2 marks)
- Classify each of the activities above as unit-level, batch-level, product-level, customer-level or organization-sustaining. (2 marks)
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