Merlot Company has determined its activity cost pools and cost drivers to be the
ID: 2447701 • Letter: M
Question
Merlot Company has determined its activity cost pools and cost drivers to be the following:
Cost pools
Setup
$56,000
Material handling
12,800
Machine operation
240,000
Packing
60,000
Total indirect manufacturing costs
$368,800
Cost drivers
Setups
400
Material moves
800
Machine hours
16,000
Packing orders
1,000
One product made by Merlot, metal casements, used the following activities during the period to produce 500 units:
Setups
20
Material moves
80
Machine hours
1,900
Packing orders
150
Required
a. Calculate the cost per unit of activity for each activity cost pool for Merlot Company.
b. Calculate the manufacturing overhead cost per metal casement manufactured
Cost pools
Setup
$56,000
Material handling
12,800
Machine operation
240,000
Packing
60,000
Total indirect manufacturing costs
$368,800
Cost drivers
Setups
400
Material moves
800
Machine hours
16,000
Packing orders
1,000
Explanation / Answer
Cost pools
Setups
Setups
Setups
Cost pools
OH Cost $ Cost drivers Qty OH cots per activity unit Activity consumption Data for 500 units of casement Activity units Total OH cost for 500 units metal casement OH cost per unit of metal casement Setup 56,000 Setups 400 140.00Setups
20 2,800.00 5.60 Material handling 12,800 Material moves 800 16.00 Material moves 80 1,280.00 2.56 Machine operation 240,000 Machine hours 16,000 15.00 Machine hours 1,900 28,500.00 57.00 Packing 60,000 Packing orders 1,000 60.00 Packing orders 150 9,000.00 18.00 Total indirect manufacturing costs 368,800 41,580.00 83.16 Cost per unit activity Amt $/unit Activity ActivitySetups
140 Material moves 16 Machine hours 15 Packing orders 60 Cost per unit of casement Activity Amt $ /unit casementSetups
5.6 Material moves 2.56 Machine hours 57 Packing orders 18 Total 83.16