Question
The following information was obtained in 2020. Activity Cost driver Cost Steel Wood Total Setup #setup $1,350,000 400 100 500 Fabrication #of machine hours $61,800,000
The following information was obtained in 2020.
| Activity | Cost driver | Cost | Steel | Wood | Total |
| Setup | #setup | $1,350,000 | 400 | 100 | 500 |
| Fabrication | #of machine hours | $61,800,000 | 300,000 | 300,000 | 600,000 |
| Packing | #shipments | $98,010,000 | 52,000 | 190,000 | 242,000 |
Review the machine-related cost above:
a) What is a likely explanation for machine-related costs being so high?
b) What might explain why total machine hours for steel fences (300,000 hours) are the same as for wood fences (300,000 hours)?
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Management Accounting
Authors: Charles T Horngren, Gary L Sundem, William O Stratton, Howard D Teall, George Gekas
5th Canadian Edition
0131922688, 978-0131922686
