Question

Detroit Foundry, a large manufacturer of heavy equipment components, has determined the following activity cost pools and cost driver levels for the year: Activity Cost Pool Activity Cost Activity Cost Driver Machine setup $576,000 12,000 setup hours Material handling 96,000 2,000 material moves Machine operation 500,000 10,000 machine hours The following data are for the production of single batches of two products, C23 Cams and U2 Shafts during the month of August: C23 Cams U2 Shafts Units produced 500 300 Machine hours 4 5 Direct labor hours 200 400 Direct labor cost $3,000 $8,000 Direct materials cost $28,000 $18,000 Tons of materials 13 8 Setup hours 3 7 Determine the unit costs of C23 Cams and U2 Shafts using ABC. Round cost per gallon to two decimal places.

Answer 1

DETROIT FOUNDRY

Cost per gallon

C23 U2

Unit produced 500 300

Direct labor cost $3,000 $8,000

Direct materials cost 28,000 18,000

machine set up cost 144 336

material handling cost 624 384

Machine operating cost 200 250

Total cost 31,968 26,970

cost per gallon :

C23 = $31,968/500 = $63.94

U2 = $26,970/300 = $89.9

workings

machine set up per set up hour = $576,000/12,000 = $48

Material handling per material move = $96,000/2000 =$48

Machine operation per machine hour = $500,000/10,000 = $50

Step-by-step explanation: