Question

Two-Stage ABC for Manufacturing: Reassigning Costs to Cost Objectives
National Technology, LTD. has developed the following activity cost information for its manufacturing activities:

Activity		Activity Cost
Machine setup	$70.00	per batch
Movement	20.00	per batch
	0.10	per pound
Drilling	3.00	per hole
Welding	8.00	per inch
Shaping	29.00	per hour
Assembly	18.00	per hour
Inspection	2.00	per unit

Filling an order for a batch of 50 fireplace inserts that weighed 150 pounds each required the following:
• Three batch moves
• Two sets of inspections
• Drilling five holes in each unit
• Completing 80 inches of welds on each unit
• Thirty minutes of shaping for each unit
• One hour of assembly per unit

Determine the activity cost of converting the raw materials into 50 fireplace inserts.

Fireplace Inserts Activity Cost
Set-up	$Answer
Movement
Batch	$Answer
Weight	Answer
Inspection	Answer
Drilling	Answer
Welding	Answer
Shaping	Answer
Assembly	Answer
Total	$Answer

Answer 1

Fireplace Inserts
Activity Cost
Set-up	$210
Movement
Batch	$60
Weight	$15
Inspection	$750
Drilling	$32,000
Welding	$725
Shaping	$900
Assembly	$100
Total	$34,760

• Workings

Activity	Activity Cost		Actual Activity driver for 50 fireplace			Activity Cost
Machine setup	$70.00	per batch	3	batches	3	$210
Movement	$20.00	per batch	3	batches	3	$60
	$0.10	per pound	150	pounds	150	$15
Drilling	$3.00	per hole	250	holes	5 holes x 50 units	$750
Welding	$8.00	per inch	4000	inches	80 inches x 50 units	$32,000
Shaping	$29.00	per hour	25	hours	0.5 hours x 50 units	$725
Assembly	$18.00	per hour	50	hours	1 hour x 50 units	$900
Inspection	$2.00	per unit	50	units of fireplace	50	$100