Stage 1 ABC for a Machine Shop: Assigning Costs to Activities

As the chief engineer of a small fabrication shop, Brenda Tolliver refers to herself as a jack-of-all-

trades. When an order for a new product comes in, Brenda must do the following:

1. Design the product to meet customer requirements.

2. Prepare a bill of materials (a list of materials required to produce the product).

3. Prepare an operations list (a sequential list of the steps involved in manufacturing the product).

Each time the foundry manufactures a batch of the product, Brenda must perform these activities:

1. Schedule the job.

2. Supervise the setup of machines that will work on the job.

3. Inspecttherstunitproducedtoverifythatitmeetsspecications.

Brenda supervises the production employees who perform the actual work on individual units of

product. She is also responsible for employee training, ensuring that production facilities are in

proper operating condition, and attending professional meetings. Brendas estimates (in percent)

of time spent on each of these activities last year are as follows:

Designing Product..........................14%

Preparing bills of materials......................5

Preparing operations lists.......................12

Scheduling jobs................ ...........15

Supervising setups ..........................5

Inspecting first units .........................2

Supervising production........................20

Training employees ..........................17

Maintaining facility ..........................6

Attending professional meetings ....................4

100%

Required

Assuming Brenda Tollivers salary is $134,000 per year, determine the dollar amount of her salary

assigned to unit-, batch-, product-, and facility-level activities