Question

Trailers R Us Company, which uses an activity-based costing system, produces travel trailers and boat trailers. The company allocates batch setup costs to the two products using the following basic data:

​	Travel trailers	Boat trailers
Budgeted units to be produced	2350	2900
Budgeted number of setups	320	530
Budgeted number of direct labor hours per unit	30	60

Total budgeted setup costs for the year are $161,400.

If the setup costs are allocated using direct labor hours, how much of the total setup costs would be allocated to boat trailers?

$226,795

$398,349

$114,861

$161,400

QUESTION 2

Non-value-added activities include all of the following EXCEPT

		assembling the products.
		inspection of the product.
		storing of raw materials.
		movement of parts within the warehouse.

Answer 1

If the setup costs are allocated using direct labor hours, how much of the total setup costs would be allocated to boat trailers?

Budgeted labour hour = (2350*30+2900*60) = 244500 Hour

Overhead allocated to boat retailers = 161400/244500*174000 = 114861

So answer is c) $114861

Non-value-added activities include all of the following EXCEPT

Inspection, storing and moving is parts of non value added activities but assembling is value added activities

So answer is a) assembling the products.