After reviewing the new activity-based costing system that Janis McGee has imple

Question

After reviewing the new activity-based costing system that Janis McGee has implemented at Joplin Industries's Port Arthur manufacturing facility, Kris Kristoff, the production supervisor, believes that he can reduce production reducing the time spent on machine setups. He has spent the last month working with employees in the plant to change over the machines more quickly with the same reliablit., He plans to produce 109,000 units of 25P and 44,500 units of J40X in the first quarter. He believes that with his more efficient setup routine reduce the number of setup hours for both the J25P and the J40X products by 34 percent. J40X J25P $ 1,509,000 $ 2,418,000 Direct material Direct labor Assembly Packaging Total direct labor Direct costs Overhead Assembly building Assembling(@ $30 per mh) Setting up machine ( $900 per setup hour) Handling material (@ $3,000 per run) Packaging building Inspecting and Packing ($5 per direct labor-hour) Shipping (@ $1,320 per shipment) Total ABC overhead Total ABC cost Number of units Unit cost $ 759,000 618,000 999,000 1,758,00o $ 996,000 378,000 $ 3,267,000 3,414,000 $ 198,000 918,000 369,000 129,000 40,500 28,500 318,000 141,000 123,000 282,000 $ 726,000 1,821,000 3,993,000 $5,235,000 44,500 109,000 36.63 117.64

Explanation / Answer

Overhead Cost J25P (109,000 UNITS) J40X (44,500 UNITS) Assembly building Assembling $198,000.00 $918,000.00 Setting up machine (@66%) $26,730.00 $243,540.00 Handling Material $28,500.00 $129,000.00 Packing Building Inspection & Packing $318,000.00 $123,000.00 Shipping $141,000.00 $282,000.00 Total ABC Overhead $712,230.00 $1,695,540.00

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