Question 6

Calcarenite Pty Ltd plans to manufacture two lines of chairs in the coming year lounge and patio. The company is considering introducing an activity-based costing system. Given below are each activity, its cost and its related activity driver.

Activity	Cost	Activity Driver
Material setups	$150,000	Number of setups
Material handling	$200,000	Number of parts
Cutting	$500,000	Number of parts
Assembly	$400,000	Direct labour hours
Finishing	$600,000	Number of units

The level of activity for the year is:

	Lounge	Patio
Units to be produced	12,000	8,000
Number of setups	30	45
Number of parts per unit	20	10
Direct labour hours per unit	4	2

Required

1. Under an activity-based costing system, what is the activity cost per unit of activity driver for assembly? (6 marks)
2. Under an activity-based costing system, what is the total cost of lounge chairs for the year? (10 marks)