UVW Automotive Parts

Scenario: Apply Activity-Based Costing

Data:

• Cost Pools and Cost Drivers:
  • Activity 1 (Setup Costs): $50,000, Cost Driver Units: 500 setups
  • Activity 2 (Quality Inspections): $80,000, Cost Driver Units: 800 inspections
  • Activity 3 (Machine Hours): $30,000, Cost Driver Units: 3,000 hours

Requirements:

1. Allocate costs to products A, B, and C based on activity-based costing.
2. Calculate the overhead rate for each activity.
3. Analyze the cost allocation and its impact on product profitability.
4. Discuss the benefits of using ABC for cost management and decision-making at UVW Automotive Parts.