ABC Manufacturing produces two models of heating stoves: pellet and wood-burning
ID: 2429524 • Letter: A
Question
ABC Manufacturing produces two models of heating stoves: pellet and wood-burning. The following information about the costs to produce the company’s products has been provided.
a. If all costs are allocated based on machine hours, what is the rate per machine hour?
b. If all costs are allocated based on machine hours, what is the amount allocated to pellet stoves?
c. If ABC uses activity based costing based on the cost pools above, what is the rate for unit-level costs?
d. If ABC uses activity based costing based on the cost pools above, what is the rate for batch-level costs?
e. If ABC uses activity based costing based on the cost pools above, what is the rate for product-level costs?
f. If ABC uses activity based costing based on the cost pools above, what is the rate for facility-level costs?
g. If ABC uses activity based costing based on the cost pools above, what amount is allocated to wood burning stoves?
Category Estimated Cost Cost Driver Pellet Stove Wood Burning Stove Unit-Level $125, 000 Labor Hours 750 500 Batch-Level $75, 000 Inspections 30 20 Product-Level $35,000 Storage Space 3500 sq. ft 2100 sq.ft Facility-Level $165,000 Machine Hours 9,000 6,000Explanation / Answer
a)Total overhead= 125000+75000+35000+165000=400000
total MH =9000+6000=15000
Rate per MH =Total overhead /total MH
= 400000/ 15000
= $ 26.67 per MH
B)amount allocated to pellet stoves =Actual MH *rate
= 9000*26.67
= $ 240030
c)
Total activity= 750+500=1250
Unit level cost = 125000/1250 = $ 100 per labor hours
d)Total activity = 30+20 = 50
Batch level cost = 75000/50 = $ 1500 per inspection