Two-Stage ABC for Manufacturing Assume Sherwin-Williams Company, a large paint m
ID: 2556348 • Letter: T
Question
Two-Stage ABC for Manufacturing
Assume Sherwin-Williams Company, a large paint manufacturer, has determined the following activity cost pools and cost driver levels for the latest period:
The following data are for the production of single batches of two products, Mirlite and Subdue:
Determine the batch and unit costs per gallon of Mirlite and Subdue using ABC. (Round your answers to the nearest cent.)
Mirlite $Answer
per gallon
Subdue $Answer
per gallon
Activity cost pool Activity cost Activity cost driver Machine setup $950,000 2,500 setup hours Material handling 620,000 5,000 material moves Machine operation 200,000 20,000 machine hoursExplanation / Answer
Cost per unit produced
Mirlite = $ 6.39 per Gallon
Subdue = $ 16.85 per Gallon
Product Cost Mirlite Subdue
Direct materials $ 350,000 $150,000
Direct labor $10,000 $ 7,500
Manufacturing overhead
Machine setup
(15hrs x $380) $ 5,700
(11hrs x $380) $ 4,180
Material handling
(70x$124) $ 8,680
(35x$124) $ 4,340
Machine Operation
(900x$10) $ 9,000
(250x$10) $ 2,500
Total cost per batch $ 3,83,380 $ 1,68,250
Gallons produced 60000 10000
Cost per unit produced $ 6.39 $ 16.85
Machine setup = $ 950000 / 2500 = $ 380
Material handling = $620000/5000 = $ 124
Machine operation = $ 200000 / 20000 = $ 10
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