Question text

Activity-Based Costing
Slack Corporation has the following predicted indirect costs andcost drivers for 2016 for the given activity cost pools:

	Fabrication Department	Finishing Department	Cost Driver
Maintenance	$80,000	$70,000	Machine hours
Materials handling	30,000	15,000	Material moves
Machine setups	70,000	5,000	Machine setups
Inspections	-	25,000	Inspection hours
	$180,000	$115,000

The following activity predictions were also made for theyear:

	Fabrication Department	Finishing Department
Machine hours	10,000	5,000
Material moves	3,000	1,500
Machine setups	700	50
Inspection hours	-	1,000

It is assumed that the cost per unit of activity for a givenactivity does not vary between departments. Slack's president,Charles Slack, is trying to evaluate the company's product mixstrategy regarding two of its five product models, ZX300 and SL500.The company has been using a company-wide overhead rate based onmachine hours but is considering switching to either departmentrates or activity-based rates. The production manager has providedthe following data for the production of a batch of 100 units foreach of these models:

	ZX300	SL500
Direct materials cost	$18,000	$24,000
Direct labor cost	$5,000	$4,000
Machine hours (Fabrication)	500	700
Machine hours (Finishing)	200	100
Materials moves	30	50
Machine setups	5	9
Inspection hours	30	60

a. Determine the cost of one unit each of ZX300 and SL500,assuming a company-wide overhead rate is used based on totalmachine hours.

Round rate to two decimal places.
Overhead rate based on total machine hours Answer per machinehour

Use rounded overhead rate calculated above for calculationsbelow. Round cost answers to the nearest whole number. Round costper unit to two decimal places.

Product Costs per Unit
	ZX300	SL500
Direct materials	$Answer	$Answer
Direct labor	Answer	Answer
Manufacturing overhead:	Answer	Answer
Total cost per batch	$Answer	$Answer
Number of units per batch	Answer	Answer
Cost per unit	$Answer	$Answer

b. Determine the cost of one unit of ZX300 and SL500, assumingdepartment overhead rates are used. Overhead is assigned based onmachine hours in both departments.

Round rate to two decimal places, if applicable.
Overhead rate based on machine hours for Fabrication Dept. $Answerper machine hour
Overhead rate based on machine hours for Finishing Dept. $Answerper machine hour

Use rounded overhead rate calculated above for calculations below.Round cost answers to the nearest whole number, when needed. Roundcost per unit to two decimal places, if needed.

Product Costs per Unit
Product Costs per Unit
	ZX300	SL500
Direct materials	$Answer	$Answer
Direct labor	Answer	Answer
Manufacturing overhead:
Fabrication Dept.	Answer	Answer
Finishing Dept.	Answer	Answer
Total cost per batch	$Answer	$Answer
Number of units per batch	Answer	Answer
Cost per unit	$Answer	$Answer

c. Determine the cost of one unit of ZX300 and SL500, assumingactivity-based overhead rates are used for maintenance, materialshandling, machine setup, and inspection activities.
Round rate to two decimal places, if applicable.

Activity-based overhead rates:
Maintenance	$Answer   per machine hour
Materials handling	$Answer per materials move
Machine setup	$Answer per machine setup
Inspection activities	$Answer per inspection hour

Use rounded overhead rate calculated above for calculationsbelow. Round cost answers to the nearest whole number, when needed.Round cost per unit to two decimal places, if needed.

Product Costs per Unit
	ZX300	SL500
Direct materials	$Answer	$Answer
Direct labor	Answer	Answer
Manufacturing overhead:
Maintenance activity	Answer	Answer
Materials handling activity	Answer	Answer
Machine setups activity	Answer	Answer
Inspections activity	Answer	Answer
Total cost per batch	$Answer	$Answer
Number of units per batch	Answer	Answer
Cost per unit	$Answer	$Answer