Assume Sherwin-Williams Company, a large print manufacturer, has determined the

Question

Assume Sherwin-Williams Company, a large print manufacturer, has determined the following activity cost pools and cost driver levels for the latest period:

Activity Cost Pool             Activity Cost              Activity Cost Driver
Machine Setup $950,000 2,500 setup hours
Material Handling 820,000    5,000 materials moves
Machine Operation               200,000                    20,000 machine hours

The following data are for the production of single batches of two products, Mirlite and Subdue.
                                Mirlite              Subdue
Gallons Produced      50,000       30,000
Direct labor hours       400    250
Machine hours    800    250
Direct labor cost           $10,000    $7,500
Direct Materials cost     $350,000          $150,000
Setup hours    15                  12
Material moves             60                  35

Determine the batch and unit costs per gallon of Mirlite and Subdue using ABC.

Explanation / Answer

Mirlite Subdue Direct Material Cost 350,000.00 150,000.00 Direct Labor cost 10,000.00 7,500.00 Overheads : Machine set up costs Mirlite- (950,000 / 2500 *15) 5,700.00 Subdue - ( 950,000 / 2500 *12) 4,560.00 Material Handling Moves : Mirlite - (820,000 / 5,000 * 60 ) 9,840.00 Subdue - ( 820,000 / 5,000 * 35 ) 5,740.00 Machine Operating Costs Mirlite - (200,000 / 20,000 * 800) 8,000.00 Subdue - ( 200,000 / 20,000 * 250 ) 2,500.00 Total Cost or Cost per Batch 383,540.00 170,300.00 Number of Gallons produced 50,000.00 30,000.00 Cost per Gallon 7.67 5.68

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