ACT 220: Chapter 19 Exercises, Part 2 Exercise 4 Pygmalion Corp. is considering

Question

ACT 220: Chapter 19 Exercises, Part 2 Exercise 4 Pygmalion Corp. is considering the use of activity-based costing. The following information is provided for the production of two product lines. Pygmalion plans to produce 400 units of Product A and 1500 units of Product B. Activity Machining Quality Control Total indirect manufacturing costs $%165,000 Cost Allocation Base $105,000 Number of machine hours 60,000 Number of inspections Direct labor hours Number of inspections Number of machine hours Product A 5,000 40 1,600 Product B 7,000 160 2,400 Total 12,000 200 4,000 Compute the ABC indirect manufacturing cost per unit for each product.

Explanation / Answer

Activity Cost Activity base Activity rate Machining 105000 4000 26.25 per machine hour Quality control 60000 200 300 per inspection Product A Product B Machining 42000 63000 Quality control 12000 48000 Total cost allocated 54000 111000 Units 400 1500 Indiret manufacturing cost per unit 135 74

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