Question

Gale Corporation manufactures windsocks. The business recently decided to adopt an ABC accounting system. The following activities have been identified: Activity Cost Driver chosen Conversion cost per unit Materials Handling Number of parts $1.00 Machining Machine Hours 60 Packaging Number of finished units 2.00 Each windsock requires three parts and spends five minutes in the machining department. The total cost of direct materials and direct labor is $3.50 per windsock. Gale produces 20,000 windsocks each year and sells them at 140% of cost. The total cost of producing the 20,000 windsocks is:

Answer 1

Answer:

The total cost of producing the 20,000 windsocks is: $270,000.

Explanation:

COMPUTATION:

MATERIAL HANDLING  OF PARTS .

$1.00

3X20,000

TOTAL OVERHEAD COST = 60,000.

MACHINING MACHINE HOURS.

60/HR

1/minute

5 X 20,000

100,000.

PACKAGING NUMBER OF  FINISHED UNITS .

$2.00

20,000 X 2

40,000.

TOTAL OVERHEAD COST  =  60,000 + 100,000 + 40,000 = $ 200,000.

Total Materials and labor

3.50 per windstocks  

3.5 x 20,000

= 70,000.

The total cost of producing the 20,000 windsocks is:

= $200,000  + 70,000

$270,000 total cost.