Two-Stage ABC for Manufacturing Columbus Foundry, a large manufacturer of heavy

Question

Two-Stage ABC for Manufacturing
Columbus Foundry, a large manufacturer of heavy equipment components, has determined the following activity cost pools and cost driver levels for the year:

The following data are for the production of single batches of two products, C23 Cams and U2 Shafts:

Determine the unit costs of C23 Cams and U2 Shafts using ABC.
C23 Cams $?
U2 Shafts $?

Activity cost pool Activity cost Activity cost driver Machine setup $600,000 12,000 setup hours Material handling 120,000 2,000 tons of materials Machine operation 500,000 10,000 machine hours

Explanation / Answer

overhead rates Machine Setup 600,000/12,000= 50 per setup hour Material Handling 120,000/2000= 60 per ton Machine Operation 500,000/10,000= 50 per machine hour overhead allocated C23 Cams U2 shafts Machine Setup 200 450 Material Handling 750 100 Machine Operation 100 250 total overhead allocated 1050 800 unit cost C23 Cams U2 shafts Direct labor cost 5000 10,000 direct materials cost 30,000 20,000 overhead allocated 1050 800 total cost 36050 30,800 units produced 500 500 Cost per unit 72.1 61.6

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