Question

Drilling Company uses activ ased costing and provides this information Manufacturing Activity Materials handling Machinery Assembly Inspection Cost Driver Number of parts Number of machine hours Number of parts Number of finished units Driver Rate $ 0.6 53 2.95 32 Drilling has just completed 82 units of a component for a customer. Each unit required 102 parts and 3.10 machine hours. The prime cost is $1,320 per finished unit. All other manufacturing costs are classified as manufacturing overhead. Required: 1. Compute the total manufacturing costs and the unit costs of the 82 units just completed using ABC costing. 2. In addition to the manufacturing costs, the firm has determined that the total cost of upstream activities, including research and development and product design, is $182 per unit. The total cost of downstream activities, such as distribution, marketing, and customer service, is $302 per unit. Compute the full product cost per unit, including upstream, manufacturing, and downstream activities. Also compute the relative proportion of each main cost category. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the total manufacturing costs and the unit costs of the 82 units just completed using ABC costing intermediate and final answers to 2 decimal places.) Total manufacturing cost Manufacturing cost per unit Required 2 >

Answer 1

no of units produced=82 units

no of parts required to produce one unit =102 parts

therefore no of parts required to produce one unit are 82*102=8364

no of machine hours = no of units*time taken to produce one unit

                              =82*3.10=254.2hours

prime cost of producing one unit is 1320$

total prime cost= no of units produced*prime cost per unit =1320*82=108240

manufacturing overheads=material handling cost+machinery+assembling cost+inspection

total material handling cost=cost driver rate*no of parts i.e...0.6*8364=5018.4

total machinery cost=cost driver rate*no of hours i.e......53*254.2=13472.6

total assembling cost =cost driver rate*no of parts i.e...2.95*8364=24673.8

total inspection cost=cost driver rate*no finished units i.e....32*82=2624

total manufacturing overheads=5018.4+13472.6+24673.8+2624=69406.8

given upstream activity cost=182per unit i.e...total upstream activity cost=182*no of units=182*82=14924

given downstream activity cost=302per uniti.e...total down stream cost = 302*no of units=302*82=24764

therefore total manufacturing cost = prime cost+manufacturing overheads+upstream and down stream cost

                                                =108240+69406.8+14924+24764

                                                =217334.8

           manfacturing cost per unit = total manufacturing cost/no of units produced

                                                =217334.8/82=2650.42