Question

Two-Stage ABC for Manufacturing
Meridian Company has determined its activity cost pools and cost drivers to be the following:

Cost pools
Setup	$35,000
Material handling	12,800
Machine operation	280,000
Packing	30,000
Total indirect manufacturing costs	$357,800

Cost drivers
Setups	350
Material moves	640
Machine hours	20,000
Packing orders	1,200

One product made by Meridian, metal casements, used the following activities during the period to produce 500 units:

Setups	20
Material moves	80
Machine hours	1,900
Packing orders	150

(a) Calculate the cost per unit of activity for each activity cost pool.

Setup	$Answer
Material handling	$Answer
Material operation	$Answer
Packing	$Answer

(b) Calculate the manufacturing overhead cost per metal casement manufactured during the period. Round your answer to the nearest cent.
$Answer

Answer 1

Requirement (a)

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost	Expected Activity (B)	Activity rate (A/B)
Setup	Number of Setup	$    35,000.00	350	$ 100.00	Per Setup
Material handling	Number of Material move	$    12,800.00	640	$   20.00	Per Material move
Machine operation	Number of Machine hour	$ 2,80,000.00	20000	$   14.00	Per Machine hour
Packing	Number of Packing order	$    30,000.00	1,200	$   25.00	Per Packing order
Total		$ 3,57,800.00

Setup	$ 100.00	Per Setup
Material handling	$   20.00	Per Material move
Machine operation	$   14.00	Per Machine hour
Packing	$   25.00	Per Packing order

Requirement (b)

Cost assigned to Metal casement
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Setup	$ 100.00	20	$             2,000.00
Material handling	$     20.00	80	$             1,600.00
Machine operation	$     14.00	1900	$           26,600.00
Packing	$     25.00	150	$             3,750.00
Total Overheads assigned			$           33,950.00
Production			500
Overhead cost per unit			$                   67.90

Cost per unit= $67.90