Reference no: EM131137692

Question 1: Two-Stage ABC for Manufacturing

Merlot Company has determined its activity cost pools and cost drives to be the following:

Cost pools
Setup	$ 56,000
Material handling	12,800
Machine operation	240,000
Packing	60,000
Total indirect manufacturing costs	$368,800
Cost drivers
Setups	400
Material moves	500
Machine hours	16,000
Packing orders	1,000

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

Setups	20
Material moves	80
Machine hours	1,900
Packing orders	150

 Required-

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

b. Calculate the manufacturing overhead cost per metal casement manufacturing during the period.

Question 2: Two-Stage ABC for Manufacturing

Assume Sherwin-Williams Company, a large paint manufacturing, has determined the following activity cost pools and cost driver levels for the latest period:

Activity Cost Pool	Activity Cost	Activity Cost Driver
Machine setup	$975,000	2,500 setup hours
Material handling	830,000	5,000 material moves
Machine operation	180,000	20,000 machine hours

The following data are for the production of single batches of two products, Mirlite and Subdue:

	Mirlite	Subdue
Gallons produced	50,000	30,000
Direct labor hours	400	250
Machine hours	800	250
Direct labor cost	$10,000	$7,500
Direct materials cost	$350,000	$150,000
Setup hours	15	12
Material moves	60	35

Required- Determine the batch and unit costs per gallon of Mirlite and Subdue using ABC.