Q. 19-5SE Darby Corp. is considering the u... [FREE SOLUTION]

Chapter 19: Q. 19-5SE (page 1065)

Darby Corp. is considering the use of activity-based costing. The following information is provided for the production of two product lines:
Activity Cost Allocation Base
Setup $ 105,000 Number of setups
Machine maintenance 60,000 Number of machine hours
Total indirect manufacturing costs $ 165,000
Product A Product B Total
Direct labor hours 7,000 5,000 12,000
Number of setups 30 170 200
Number of machine hours 1,600 2,400 4,000
Darby plans to produce 375 units of Product A and 250 units of Product B. Compute the ABC indirect manufacturing cost per unit for each product.

Expert verified

Per unit indirect cost

For Product A: $106

For Product B: $501

$predetermined rate for setup = \frac{total setup cost}{total number of setups} = \frac{$ 105, 000}{200} = $ 525$

$predetermined rate for machine maintenance = \frac{total machine maintenance cost}{total number of machine hour} = \frac{$ 60, 000}{4000} = $ 15$

$setup cost for product A = predetermined rate for setup 脳 no . of setups required for produc A = $ 525 脳 30 = $ 15, 750$

$maintenance cost for product A = predetermined rate for setup 脳 no . of machine hour required = $ 15 脳 1600 = $ 24, 000$

$total indirect cost for product A = setup cost + machine maintenance cost = $ 15, 750 + $ 24, 000 = $ 39, 750$

$per unit indirect cost for product A = \frac{Total indirect cost}{no . of units produced} = \frac{$ 39, 750}{375} = $ 106$

$setup cost for product B = predetermined rate for setup 脳 no . of setups required for produc B = $ 525 脳 170 = $ 89, 250$

$maintenance cost for product B = predetermined rate for setup 脳 no . of machine hour required = $ 15 脳 2400 = $ 36, 000$

$total indirect cost for product B = setup cost + machine maintenance cost = $ 89, 250 + $ 36, 000 = $ 125, 250$

$per unit indirect cost for product B = \frac{Total indirect cost}{no . of units produced} = \frac{$ 125, 250}{250} = $ 501$

Unlock Step-by-Step Solutions & Ace Your Exams!

Over 30 million students worldwide already upgrade their learning with 91影视!

All the tools & learning materials you need for study success - in one app.

Recommended explanations on Business Studies Textbooks

View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.