Reference no: EM132763233

A manufacturing company has the following two activities associated with completion of products:

1. The setting up of machines for running batches of products
2. The actual production of units produced
3. The company has annual manufacturing overhead costs of $2,000,000, of which $200,000 is directly involved in setting up machines for batch runs. During the year, the company expects to perform 400 machine setups, one setup per batch for a total of 400 batches of production. Assume that the batch sizes vary considerably, but the work involved in setting up the machines is not appreciably different from one job to the next.

Problem 1: If the company estimates that the $200,000 costs associated with setups will yield 400 setups this year, the cost associated directly with each setup will be