The production supervisor at the Port Arthur Manufacturing facility has given more thought to the appropriate cost driver for setups and believes it should be production runs, not setup hours. Compute the activity based costs for the two camera models at Joplin assuming an activity based costing system where setup cost is allocated based on the number of production runs. Use data from Exhibits 9.13 and 9.14.
|
A |
B |
C |
D |
E |
1 |
|
|
Cost Driver Volume |
||
2 |
Activity |
Cost Driver |
J25P |
J40X |
Total |
3 |
Assembly building |
|
|
|
|
4 |
Assembling |
Machine hours |
6,000 |
30,000 |
36,000 |
5 |
Setting up machines |
Setup hours |
40 |
400 |
440 |
6 |
Handling material |
Production runs |
8 |
40 |
48 |
7 |
Packaging building |
|
|
|
|
8 |
Inspecting and packing |
Direct labor hours |
60,000 |
22,800 |
82,800 |
9 |
Shipping |
Number of shipments |
100 |
200 |
300 |
10 |
|
|
|
|
|
Exhibit 9.13 Cost Drivers and Cost Driver Volumes—Port Arthur Manufacturing Facility
|
A |
B |
C |
D |
E |
F |
G |
H |
1 |
|
Overhead |
÷ |
|
Cost Driver |
= |
|
Cost Driver |
2 |
Building and Activity |
Cost |
|
|
Volume |
|
|
Rate |
3 |
Assembly building |
|
|
|
|
|
|
|
4 |
Assembling |
$ 1,080,000 |
÷ |
36,000 |
machine hours |
= |
$ 30 |
per machine hour |
5 |
Setting up machines |
396,000 |
÷ |
440 |
setup hours |
= |
$ 900 |
per setup hour |
6 |
Handling material |
144,000 |
÷ |
48 |
production runs |
= |
$ 3,000 |
per production run |
7 |
Total Assembly building overhead |
$ 1,620,000 |
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
9 |
Packaging building |
|
|
|
|
|
|
|
10 |
Inspecting and packing |
$ 414,000 |
÷ |
82,800 |
direct labor hours |
= |
$ 5 |
per direct labor hour |
11 |
Shipping |
396,000 |
÷ |
300 |
shipments |
= |
$ 1,320 |
per shipment |
12 |
Total Packaging building overhead |
$ 810,000 |
|
|
|
|
|
|
13 |
Total overhead |
$ 2,430,000 |
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
Exhibit 9.14 Third Quarter Overhead Cost Data—Port Arthur Manufacturing Facility
[[Exercises]]