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Stanley Company has identified the following activities related to indirect production costs: Activity Activity Costs Cost...

  1. Stanley Company has identified the following activities related to indirect production costs:

    Activity Activity Costs Cost Drivers
    Machine Setup $180,000 1,500 setup hours
    Materials Handling $50,000 12,500 pounds of materials
    Electric Power $20,000 20,000 kilowatt hours

    Stanley Company has obtained the following data concerning two products:

    Product 1 Product 2
    Number of units produced 4,000 20,000
    Direct materials cost $20,000 $25,000
    Direct labor cost $12,000 $20,000
    Number of setup hours 100 120
    Pounds of materials used 500 1,500
    Kilowatt-hours 1,000 2,000

    Using an activity-based costing system, what amount of materials handling cost is assigned to Products 1 and 2?
    Product 1 Product 2

    a.

    $8,333 $41,667

    b.

    $20,000 $30,000

    c.

    $12,500 $37,500

    d.

    $2,000 $6,000

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Answer is highlighted in yellow: Solution: d. $2,000 $6,000 Answer: Explanation: Material handling rate = (50000/12500) = Pro

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