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Question 8
Durable Engines Company uses ABC to account for it manufacturing process.
Activities
Indirect activity
budget
Allocation base (cost driver)
Materials handling
$
36,000
Based on number of parts
Machine setup
$
19,200
Based on number of setups
Assembling
$
6,000
Based on number of parts
Packaging
$
12,800
Based on number of finished units
Durable Engines Company expects to produce 2,000 engines. Durable Engines Company also expects to use 12,000 parts and have 16 setups.
The allocation rate per engine setup is
$0.60
$18
$1200
$4625
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