Stage 1 ABC For Machine Shop: Assigning Costs to Activity

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. Inspect the first unit produced to verify that it meets specifications.

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. Brenda's estimates (in percent) of time spent on each of theses activities last year are as follows:

Unit level activities:
Supervising production	25%
Batch level activities:
Scheduling jobs	18%
Supervising setups	7%
Inspecting first units	1%
Product level activities:
Designing product	15%
Preparing bills of materials	5%
Preparing operations lists	8%
Facility level activities:
Training employees	14%
Maintaining facility	5%
Attending professional meetings	2%
	100%

Assuming Brenda Tolliver's salary is $132,000 per year, determine the dollar amount of her salary assigned to unit-, batch-, product-, and facility-level activities.

	% of Time Spent on Activity	Assignment of Salary
Unit level:
Supervising production	Answer
Total	Answer	Answer
Batch level:
Job scheduling	Answer
Supervising setup	Answer
First unit inspection	Answer
Total	Answer	Answer
Product level:
Product design	Answer
Preparing bills of materials	Answer
Preparing operations lists	Answer
Total	Answer	Answer
Facility level:
Employee training	Answer
Facility maintenance	Answer
Attending professional meetings	Answer
Total	Answer	Answer
Grand total	Answer	Answer