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 $60.00 per batch Movement 15.00 per batch 0.10 per pound Drilling 3.00 per hole Welding 4.00 per inch Shaping 25.00 per hour Assembly 18.00 per hour Inspection 2.00 per unit Filling an order for a batch of 50 fireplace inserts that weighed 100 pounds each required the following: • Four batch moves • Two sets of inspections • Drilling ten holes in each unit • Completing 100 inches of welds on each unit • Forty-five 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. Round answers to the nearest whole number, if applicable.

Answer 1

STEP 1 - FIND rate per activity

activity	cost	cost driver	cost of converting the raw materials into 50 fireplace inserts	working
machine set up	$60 per batch	1 batch	60$[$60*1batch]
Movement	$15 per batch	4 batches moves	60$[$15*4]
	$0.10 per pound	100 pounds	500$[$0.10*5000pounds]	100 pounds *50fireplaces
drilling	$3 per hole	10 holes	1500$[500holes*3$ per hole]	10holes in each unit*50units
hole welding	$4.00 per inch	100 inch	20000$[5000inches*$4]	100inch per unit*50units
shaping	$25 per hour	45 minutes	938$[37.5hours *25 per hour]	45 minutes each unit *50units / 60minuts
assembly	$18 per hour	1 hour	900$[50hours*18$]	1hour*50unit
inspection	$2 per unit	2 inspections	$200	[$2 per unit*50units*2 sets of inspection]
		total cost	24158$