Texts: Fortunado Company uses ABC to account for its chrome wheel manufacturing process. Company managers have determined that there are four activities involved in the process: materials handling, machine setup, insertion of parts, and finishing. The budgeted activity costs for the upcoming year and their allocation bases are as follows:
Activity cost allocation rate:
- Materials handling: $13,200 / Number of parts
- Machine setup: $5,200 / Number of setups
- Insertion of parts: $49,500 / Number of parts
- Finishing: $154,000 / Total
Fortunado Company expects to produce 1,000 chrome wheels during the year. The wheels are expected to use 3,300 parts, require 20 setups, and consume 2,100 hours of finishing time.
Job 420 used 200 parts, required 2 setups, and consumed 150 finishing hours.
Job 510 used 500 parts, required 3 setups, and consumed 340 finishing hours.