3) Sandler Company has identified the following activities related to indirect p

Question

3) Sandler Company has identified the following activities related to indirect production costs: ctivit Machine Setup Materials Handling Electric Power ctivity Costs $180,000 $50,000 $20,000 Cost Drivers 1,500 setup hours 12,500 pounds of materials 20,000 kilowatt hours Sandler Company has obtained the following data concerning two products: Product B 20,000 $25,000 $20,000 120 1,500 2,000 ul Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours 4,000 $20,000 $12,000 100 500 1,000 Using activity-based costing, what amount of electric power cost is assigned to Product A and Product B? Product A A) $3,333 C) $5,000 E) none of the above Product B $16,667 $15,000 Product A B)$1,000 D) $6,667 Product IB $2,000 $13,333

Explanation / Answer

Answer B is Correct Product A - $1,000 & Product B -$2,000

Activity Activity overhead Cost Total Activity Activity Rate Electric Power 20,000      20,000 1 Per Kilowatt Hour Activity Rate = Activity Overhead cost/Activity level Electric power cost assinged to Product A and product B Product A Product B Activity Activity Rate Activity Cost assigned Activity Cost assigned Electric Power 1 per KWH 1000 1000         2,000 2000 (1000 X 1) (2000 X 1)

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