ABC Manufacturing produces two models of heating stoves: pellet and wood-burning
ID: 2429538 • 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
6,000
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?
6,000
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?
Explanation / Answer
e) Rate for Product Level Costs = Estimated Product Level Costs/Total Storage Space
= $35,000/(3,500+2,100)
= $35,000/5,600 Sq. Ft. = $6.25 per Sq. Ft.
f) Rate for Facility Level Costs = Estimated Facility Level Costs/Total Machine hours
= $165,000/(9,000+6,000)
= $165,000/15,000 = $11 per machine hour
g) Rate for Unit Level Costs = $125,000/(750+500)
= $125,000/1,250 = $100 per labor hour
Rate for Batch Level Costs = $75,000/(30+20)
= $75,000/50 = $1,500 per inspection
Allocation of costs to Wood Burning Stoves
= ($100*500 hrs)+($1,500*20 inspections)+($6.25*2,100 sq. ft.)+($11*6,000 hrs)
= $50,000+$30,000+$13,125+$66,000 = $159,125
Therefore the amount allocated to wood burning stoves is $159,125.