The Catchem Reel Company uses an activity-based costing system toaccount for its
ID: 2462206 • Letter: T
Question
The Catchem Reel Company uses an activity-based costing system toaccount for its production of fishing equipment. In the case of fishingreels, each reel has $200 of direct materials, $75 of direct labor,includes 25 parts, and requires 10 hours of machine time. Information oncosts, manufacturing activities, and cost drivers is listed below.(Note: “cost per cost driver unit” refers to cost per part, per hour, orper reel, respectively.)
What is the total cost to produce, polish,assemble, and test one reel? Please Show All Work
Manufacturing Activity Cost Driver Cost Per Cost Driver Unit Material handling Number of parts $5.00 Polishing Machine hours (MH) 6.00 Assembling Number of parts 3.00 Testing Number of finished reels 10.00Explanation / Answer
Total cost per reel = Direct materials + Direct labor + Allocated overhead
= $200 + $75 + (25 x $5 + 10 x $6 + 25 x $3 + 1 x $10)
= $275 + $(125 + 60 + 75 + 10)
= $(275 + 270)
= $545