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Problem - Two-Stage ABC for Manufacturing
Columbus Foundry, a large manufacturer of heavy equipment components, has determined the following activity cost pools and cost driver levels for the year:
Activity cost pool
Activity cost
Activity cost driver
Machine setup
$600,000
12,000 setup hours
Material handling
120,000
2,000 tons of materials
Machine operation
500,000
10,000 machine hours
The following data are for the production of single batches of two products, C23 Cams and U2 Shafts:
C23 Cams
U2 Shafts
Units produced
500
Machine hours
2
5
Direct labor hours
400
200
Direct labor cost
$5,000
$10,000
Direct materials cost
$30,000
$20,000
Tons of materials
12.5
8
Setup hours
4
9
Required - Determine the unit costs of C23 Cams and U2 Shafts using ABC.
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