Product costing in an activity-based costing system


Question:

Product costing in an activity-based costing system

Fortunado, Inc., uses activity-based costing to account for its chrome bumper manufacturing process. Company managers have identified four manufacturing activities: materials handling, machine setup, insertion of parts, and finishing. The budgeted activity costs for 2012 and their allocation bases are as follows:

Activity

Total Budgeted Cost

Allocation Base

Materials handling

$ 9,000

Number of parts

Machine setup

3,900

Number of setups

Insertion of parts

42,000

Number of parts

Finishing

82,000

Finishing direct labor hours

Total

$ 136,900


Fortunado expects to produce 500 chrome bumpers during the year. The bumpers are expected to use 4,000 parts, require 10 setups, and consume 1,000 hours of finishing time.

Requirements

1. Compute the cost allocation rate for each activity.

2. Compute the indirect manufacturing cost of each bumper.

Solution Preview :

Prepared by a verified Expert
Accounting Basics: Product costing in an activity-based costing system
Reference No:- TGS02051669

Now Priced at $10 (50% Discount)

Recommended (97%)

Rated (4.9/5)

2015 ┬ęTutorsGlobe All rights reserved. TutorsGlobe Rated 4.8/5 based on 34139 reviews.