Background: Elon Musk, the man who is responsible for revolutionizing the automotive space is confused. Why you...

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Background: ElonMusk, the man who is responsible for revolutionizing the automotivespace is confused. Why you ask?
He met with Ms. Static whoexplained to him that under the current allocation system,engineering costs amount to $46,880 per Model S and $15,630 perModel X. Elon responds:
"How - Look at the Model X -its freaking awesome and is insanely over engineered. How can itcost leass than our base model?" he decides to hire you as aconsultant to drive transperency into the costs …
Problem: Develop ABC to clearthe mess up
Cost Pool Activity Costs Cost Driver Driver
Machine Setup $                      360,000 Setup Hours                             4,000
Materials Handling $                      100,000 Material (lbs)                           20,000
Utility $                        40,000 Kw/hr                           40,000
Information by Product Model S Model X
Units                              4,000                   20,000
Direct Materials $                        42,000 $               54,000
Direct Labor $                        24,000 $               40,000
Setup Hours                                 200                        240
Materials                              1,000                     3,000
Kw/Hr                              2,000                     4,000
ii What / How do you suspect Ms. Static arrived at hernumbers?

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4.2 Ratings (857 Votes)


		(A)	(B)	(A)/(B)
	Activity cost driver	Activity cost	Driver	Overhead Rate
Machine Setup	Setup Hours	$ 3,60,000.00	4000	$ 90.00
Material Handling	Material (Lbs)	$ 1,00,000.00	20000	$ 5.00
Utility	KW/H	$ 40,000.00	40000	$ 1.00


	Model S	Model X
Units=(A)	4000	20000
Direct Material	$ 42,000.00	$ 54,000.00
Direct Labor	$ 24,000.00	$ 40,000.00
Machine Setup(200$90) for Model S,(240$90) for Model X	$ 18,000.00	$ 21,600.00
Material Handling(1000$5) for Model S,(3000$5) for Model X	$ 5,000.00	$ 15,000.00
Utiltiy(2000$1) for Model S,(4000 $1) for Model X	$ 2,000.00	$ 4,000.00
Total Cost=(B)	$ 91,000.00	$ 1,34,600.00
Cost per unit=(B)/(A)	$ 22.75	$ 6.73

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Background: ElonMusk, the man who is responsible for revolutionizing the automotivespace is confused. Why you ask?He met with Ms. Static whoexplained to him that under the current allocation system,engineering costs amount to $46,880 per Model S and $15,630 perModel X. Elon responds:"How - Look at the Model X -its freaking awesome and is insanely over engineered. How can itcost leass than our base model?" he decides to hire you as aconsultant to drive transperency into the costs …Problem: Develop ABC to clearthe mess upCost PoolActivity CostsCost DriverDriverMachine Setup$ 360,000Setup Hours 4,000Materials Handling$ 100,000Material (lbs) 20,000Utility$ 40,000Kw/hr 40,000Information by ProductModel SModel XUnits 4,000 20,000Direct Materials$ 42,000$ 54,000Direct Labor$ 24,000$ 40,000Setup Hours 200 240Materials 1,000 3,000Kw/Hr 2,000 4,000iiWhat / How do you suspect Ms. Static arrived at hernumbers?

Background: ElonMusk, the man who is responsible for revolutionizing the automotivespace is confused. Why you ask?
He met with Ms. Static whoexplained to him that under the current allocation system,engineering costs amount to $46,880 per Model S and $15,630 perModel X. Elon responds:
"How - Look at the Model X -its freaking awesome and is insanely over engineered. How can itcost leass than our base model?" he decides to hire you as aconsultant to drive transperency into the costs …

Problem: Develop ABC to clearthe mess up

Cost Pool	Activity Costs	Cost Driver	Driver
Machine Setup	$ 360,000	Setup Hours	4,000
Materials Handling	$ 100,000	Material (lbs)	20,000
Utility	$ 40,000	Kw/hr	40,000


Information by Product	Model S	Model X
Units	4,000	20,000
Direct Materials	$ 42,000	$ 54,000
Direct Labor	$ 24,000	$ 40,000
Setup Hours	200	240
Materials	1,000	3,000
Kw/Hr	2,000	4,000



ii	What / How do you suspect Ms. Static arrived at hernumbers?