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.

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

Calculation of Activity Based Cost

Activity Cost	$
Set up cost	60
Movement
Batch(4 batch move*15 per batch)	60
Weight(100 pounds*.10 per pound*4 batch move *50)	2000
Inspectors (2 sets of inspectors*2 per unit*50)	200
Drilling (10 holes in each unit*3 per hole *50)	1500
Welding (100 inches for each unit*4 per inch*50)	20000
Shaping (25per hour*(45/60)*50)	938
Assembly (18 per hour*1 hour*50)	900
TOTAL	25658

(Answer is rounded off)