PROBLEM 1

Cost Driver Rates

Set up Cost 250 per setup (200,000/800)
Inspection/quality costs 300 per test (120,000/400)
Stores receiving 140 per requisition 252,000/1800)
Product W cost per unit

Budgeted Production 15,000 Batches 100 No. of purchase requisition 80

Divide: Batch Size / 150 units Divide: every second batch 2 per requisition * 140
= 100 batches = 50 = 11,200
per setup * 250 per test * 300 / 15,000 units
25,000 = 15,000 Stores receiving costs = 0.75
/ 15,000 units / 15,000 units
Setup Costs = 1.67 Inspection/quality costs = 1.00

Product W
Direct Materials 2.50
Direct Labor 0.54 (18*0.03)
Setup Cost 1.67
Inspection/quality costs 1.00
Stores receiving costs 0.75
ABC cost per unit 6.46
PROBLEM 2

a. Total cost
150,000 / 15,000 = 10 per purchase order Product A Product B
175,000 / 10,000 = 17.50 per receiving report 50 purch. orders * 10 500
225,000 / 50,000 = 4.50 per phone call 100 purch. orders * 10 1,000
150 receiving rep. * 17.50 2,625
400 receiving rep. * 17.50 7,000
200 phone calls * 4.50 900
350 phone calls * 4.50 1,575
Total Cost 4,025 9,575

b. Product A = 4,025 / 1,500 = 2.68 per unit

Product B = 9,575 / 3,000 = 3.19 per unit