Hippity Hoppity Brew is a manufacturer of Small, Medium and Large size malting e

Question

Hippity Hoppity Brew is a manufacturer of Small, Medium and Large size malting equipment for use in craft breweries across the United States and Canada. They are implementing an activity based cost (ABC) system and have compiled the following indirect cost information.

During the period, the Medium sized equipment line at Hippity Hoppity Brew used 650 machine hours, used 6200 square feet of floor space, received 63 orders, experienced 13 engineering changes and had 8 warranty claims. $128723 of direct labor and $73535 of direct material were charged towards the Medium sized equipment line during the year.

Under the ABC system, how much indirect cost was charged to the Medium line during the year? round your answer to the whole dollar

Cost Pool Estimated Cost Cost Driver Est Total Cost Driver Equipment Maintenance $50072 Machine Hours 1500 Hours Production Facility Costs $78410 Footprint (sqft) 20000 Square Feet Order Processing Costs $21504 Num of Orders 200 Orders Engineering Changes $43534 Num of Changes 50 Changes Customer Relations $14139 Warranty Claims 30 Claims

Explanation / Answer

Total Indirect Cost to be charged

Cost Pool Activity rate (A) Applied on Hippity Hopitty (B) Total cost (A)x(B) Equipment manintenance 50072/1500=33.38 650 21697 Production facility costs 78410/20000=3.92 6200 24304 Order Processing cost 21504/200=107.52 63 6774 Engineering changes 43534/50=870.68 13 11319 Customer relations 14139/30=471.3 8 3770 TOTAL INDIRECT COST 67864

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