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Maximum Inc. manufactures seals that are used in outdrive motors for boats. The seals, classified as either Seal-A or Seal-B, are manufactured on a
Maximum Inc. manufactures seals that are used in outdrive motors for boats. The seals, classified as either Seal-A or Seal-B, are manufactured on a common assembly line. Although different direct materials are used and the machinery is re-tooled for each product, the direct laborers are the same for each product line. The plant-wide rate for allocating manufacturing overhead to its products is no longer acceptable. The production manager has heard about activity-based costing and has assembled some information for use in changing the cost system into a cost driver concept, through the development of homogenous cost pools. Activity Material handling Machining Assembly Inspection Direct costs: Labor Materials Cost Driver Number of parts Machine hrs. Allocation Rate $1.40 per part $21.00 per hr. Units began $2.02 per unit Number tested $2.60 per unit Activity used in: Seal-A Se al-B 2,600 266 1,400 160 1,620 380 1,860 1,660 $15,200 $15,200 $7,340 $5,120 With the help of the accounting department, the manager has been able to establish the following relationships between production costs and some of the indirect manufacturing activities for August, along with the production data for the two product lines as presented above. Required: Determine the total production cost of each of the two product lines for August and the cost per unit, assuming all units started were completed. Round all figures to 2 decimal places.
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