Woodland Corporation has developed the following activity cost information for i

ID: 2588086 • Letter: W

Question

Woodland Corporation has developed the following activity cost information for its manufacturing activities:

Filling an order for a batch of 100 fireplace inserts (each insert weighing 50 pounds) required the following:

Three batch moves

Two sets of inspections

Drilling six holes in each unit

Completing 90 inches of welds on each unit

Thirty minutes of shaping for each unit

One hour of assembly per unit

Determine the activity cost of converting the raw materials into 100 fireplace inserts. $Answer

Activity Activity cost Machine setup $ 70.00 per batch Movement 12.00 per batch move 0.12 per pound Drilling 5.00 per hole Welding 3.00 per inch Shaping 20.00 per hour Assembly 16.00 per hour Inspection 1.50 per unit

Explanation / Answer

Woodland Corporation

Determination of the activity cost of converting the raw materials into 100 fireplace inserts:

Activity

Activity Rate

Cost

Machine setup

1 batch

$70

Movement

3 batch moves

$12

$36

50 pounds x 100

$0.12

$600

Drilling

6 holes x 100

$5.00

$3,000

Welding

90 welds x 100

$3.00

$2,700

Shaping

0.5 hr x 100

$20

$1,000

Assembly

1 hr x 100 units

$16

$1,600

Inspection

2 sets x 100

$1.50

$300

Total

$9,306

The activity cost of converting the raw materials into 100 fireplace inserts = $9,306