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Two-Stage ABC for Manufacturing

Merlot Company has determined its activity cost pools and

cost drivers to be the following:

Cost PoolsSetup$59,500Material handling16,000Machine operation300,000Packing60,000Total indirect manufacturing costs$435,500

Cost driversSetups350Material moves640Machine hours20,000Packing orders1,000

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

Setups20Material moves80Machine hours1,900Packing orders150

and this is what I did:

a. Calculate the cost per unit of activity for each activity cost pool for Merlot Company.

Setup costsAnswer

Screen Shot 2020-02-11 at 11.46.34 AM.png

and This is how I thought it should be done, but it was all wrong


Activity cost poolAmount$Setup20 setups*$170 per setup =3400Material

handling80 material moves*$25 per move =2000

Machine operation1900 hours*$15 per hour=28500

Packing150 orders*$60 per order =9000

Total activity costs42900

Screen Shot 2020-02-11 at 11.46.34 AM.png

a. Calculate the cost per unit of activity for each activity cost pool for Merlot Company. Setup costs $ 3,400 x
Materials handling costs $ 2,000 a:
Machine operating costs $ 28,500 3:
Packing costs $ 9,000 x b. Calculate the manufacturing overhead cost per metal casement manufactured during the period.
Round cost per unit to two decimal places, if needed. Manufacturing Overhead Cost per Metal Casement Material moves
Machine hours
Packing orders
Total manufacturing overhead
Casements produced
Cost per casement

Top Answer

a). Cost per Unit for each activity Setup... View the full answer

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