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A firm produces and sells two products, Standard and Deluxe. The following information relates to ...
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A firm produces and sells two products, Standard and Deluxe. The following information relates to ...
A firm produces and sells two products, Standard and Deluxe. The following information relates to setup costs of $180,000 (a part of factory overhead).
Standard
Deluxe
Units produced
1,600
1,600
Number of setups
100
125
Direct labor hours per unit
9
9
Total direct labor costs
$9,000
$9,000
Activity-based costing will allocate which of the following amounts of setup cost to each unit (rounded to the nearest dollar)?
Standard
Deluxe
▸
$56
$56
▸
50
63
▸
356
444
▸
126
101
Textbook
Managerial Accounting
Edition:
4
th
Author:
Davis
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50
63
Units per setup for Standard: 1,600 ÷ 100 = 16; Units per setup for Deluxe: 1,600 ÷ 125 = 12.8;
$180,000 ÷ (100 + 125) = $800 per setup;
Standard setup cost per unit = $800 ÷ 16 = $50;
Deluxe setup cost per unit = $800 ÷ 12.8 = $62.50 (rounded to nearest dollar is $63.00)
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